Kudos to Greg for his informative post. I still think the why question hasn't been answered and being a good social scientist, I admit I am totally clueless.

That said, a couple of addenda to keep the ball rolling. First, a minor point, Greg is correct in saying that Japan is not Greece or Italy and does not face the imminent danger of a sovereign debt crisis.
Nonetheless, if a sell off of JGBs does occur, as hypothetically projected by the banks, banks will have to severely cut its credit lines to maintain their balance sheets, causing a freezing of the financial markets and a severe contraction of the real economy.
Imagine JGBs suddenly becoming akin to the toxic assets during the Wall St, meltdown of 2008, or the current contraction of French and German economies due to their banks' exposure to Greek government bonds, and you will get the unpleasant picture So, we are actually living on a very dangerous fault line, and when it does erupt (god forbid) it will be catastrophic.

But that does not answer the initial question, why, oh, why Mr. Noda?

My tuppence worth comes from Noda's own locutions, namely, political legacy.
I don't think he or any of the DPJ leaders want the DPJ government to go down in history as a government that just drifted along and ended up admitting its whole manifesto was a pack of lies. Legacy might seem a bit off the wall but wasn't that what Hatoyama wanted to achieve (by picking the worst possible issue) as well as Kan (at the worst possible timing).
Newcomers to power usually what to do some good with it (unless you're Shakespeare's Richard III, not the real
King) and have at their discretion the policy to choose. Everyone's still second guessing why Koizumi picked Postal Reform.

If such is Noda's motive, he couldn't be at a worse position and at the worst time: you do not launch bold new initiatives approaching the end of the parliamentary term and after you lost your majority of the upper house.
Quite the opposite, you lay out such plans after you've won an election and have accumulated political capital, preferably large enough to claim a mandate.

So is there a silver lining to Noda's courageous acts?
Or is he not unlike the real Richard III who plunged onto his death at Battle of Bosworth Field.
If you believe what Noda has been insinuating, I think his end game is a negotiated dissolution (dissolution
*pro* bill passage ). He has been taking of dissolution as early as committing himself to the tax increase.

Think of it, there is no way he or the DPJ can retain his current majority.
Even if the voters will punish the DPJ for increasing taxes, which I am sure they will, they might not flock to the LDP, which we all know is not opposed to consumption tax increase and is being obstructive in wont of an election). Actually, his and the DPJs best chances of remaining in power is the take credit for passing the consumption tax, and blaming the LDP of partisan maneuvering. There is a good chance that neither LDP or DJP will win a majority and the DPJ will come out of the fray being the largest party (and those who will lose their seats will be the Ozawa group, anyway).

On the other hand if he hadn't taken up the tax issue, the DPJ government will have to face the voter's verdict as the worst do nothing, could not do anything, broke all promises government in recent history.I think Noda and DPJ leaders are aware of the dire alternative.

In short, upon assuming power Noda was already in an impossible boxed-in position. If he and his party want to be credited for having achieved something before facing the pearly gates of the electorate, they have little choice but to try boxing their way out. Not unlike ol' Winston after the Battle of France, eh?

Well,anyhow, there's my tuppence.

Nobuhiro Hiwatari
Inst of social sciences