An acquaintance of mine in finance sent me THIS article with a dire prognosis for the future of Japan.
Basically, Japan is really in for it when they can no longer borrow money on the cheap. If the price of borrowing rises the results could be catastrophic. (Think of what happened to many of the people who bought homes using mortages with teaser rates.) The Japanese government may default on its debt or, according to David Einhorn of Greenlight Capital, enter a period of hyperinflation where prices rise out of control in response to lack of confidence that the Japanese currency will maintain its value.
Japan's ability to service its truly staggering national debt is dependent on the strength of the export economy and the populace acting as a source of finance. Unfortunately for the government, the export economy has taken a real beating in recent years. This in my understanding is in large part due to the domestic economic policies of the last decade, which drove Japanese companies to move their assets overseas to get better returns. Japanese companies could do OK because they didn't need Japanese revenue, they got most of their money from sales overseas. However, with the financial crisis, the amount of overseas revenue has been slashed. A strong yen in a global downturn = nicht gut because their exports became less competitive.Worse still, Japan's population is shrinking, and aging; meaning a decrease in available finance as the tax base shrinks and savings are used fund retirement.
What a mess.