That is the takeaway for this weekend.
Decades ago this blessed land's bureaucrats and the research arm of the Liberal Democratic Party established that government finances faced a demographic wall, where the European-style social welfare benefits and United States-levels of taxation would collide with a wave of retirees, necessitating either:
1) mass privatization of government functions
2) reversals in the promises made to the citizens
3) higher taxation
4) potentially hyper-inflationary levels of government indebtedness, or
5) a combination of the above.
The solution the bureaucrats and the LDP proposed was a consumption tax, with an initial target rate of 10%.
It has taken thirty years to walk the walk from realization to realization. At least three prime ministers have had their heads handed to them over the tax, first for the imposition of a nominal 3% tax, then for each step of the march up to 10%.
However, on Friday, with every political instinct and a slug of economic analysis pulling in the opposite direction, Prime Minister Noda Yoshihiko managed to drag an opposition-controlled House of Councillors over the goal line.
The political costs have been enormous. Noda will most likely be rewarded, as he should be, with reelection as party president in September. However, he will preside over a much diminished Democratic Party of Japan, over 60 members of which have decamped in one way or another over the consumption tax. The Cabinet's and the DPJ's opinion polling numbers are in the cellar, with an election looming.
One can hate the raising of the consumption tax...and a lot of folks do, for reasons both intellectually sound and transparently selfish.
However, one cannot, no, one must not deny the bravery and tenacity of the prime minister, who sacrificed political blood and capital his party could not spare. When all the sirens are singing sweet songs about how cheaply the government can borrow money, Noda and his wounded party have sent a signal to the holders of Japan's bonds that the government of this blessed land will make good upon its debts through a willingness to both inflict pain and accept annihilation.
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