This is very complicated and has a lot to do with the consumption tax increase in September.
If inflation can be induced, which I'm increasingly feeling it won't, it's not the the debt ratio that is the issue but the increased burden of interest repayment.
Imagine being at a JGB auction where there is only one entity present, as buyer and seller? That's what is happening now. Both buyer and seller set the auction price and as the BoJ is the largest holder of bonds interest payments can be recycled as new bonds.
Government moves are to increase inflation to inflate away enough debt and to keep a lid on bond prices.
Interesting too is that the BoJ would quietly like to slow QE but it may be pushed to continue. The operation is, in dollar terms, the same amount as the US in an economy one third the size.
It is total manipulation by the BoJ so you would have to be quite a sophisticated investor to look behind the scenes.
If there were a problem the first thing could be a bond market rout with the BoJ again the only buyer for trillions of yen worth of bonds.
Japan though is to strategic for the FED to allow that to happen.....we hope.
