TOKYO - The Japanese government is finalizing plans to increase corporate and income tax rates to fund its plan to nearly double defense spending to 2 percent of gross domestic product (GDP), Kyodo News cited sources as saying on Wednesday.

The government is targeting April 2026 for a 4 percent hike in corporate tax rates, while the income tax rate is expected to rise by 1 percent starting January 2027, according to the report.

Additionally, tobacco taxes will likely be raised incrementally from April 2026.

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Japan plans to outlay a total of 43 trillion yen (about $284 billion) on national defense over the five years through fiscal 2027 and the government aims to collect an additional 1 trillion yen annually through the tax increases, according to the report.

The government and ruling parties are drafting comprehensive tax reform plans for fiscal 2025, beginning next April. The finalized schedule for the tax increases is expected to be outlined in a draft to be completed by the end of December, the report added.

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The expansion of Japan's military budget has raised concerns domestically and internationally.

The country has set a goal outlined in its 2022 National Security Strategy of bringing defense spending to 2 percent of the GDP in fiscal 2027, after long maintaining an informal cap of around 1 percent, or about 5 trillion yen, under its war-renouncing Constitution.