There is a reason that there is no observable panic on the part of Japanese government bond (JGB) holders. The problem is not quite as scary as the commonly cited figures suggest: the often-quoted central plus local government gross debt, which rose from 75% of GDP to 225% over two decades.

The central government portion (short-term bills and
JGBs) is still a very large 195% of GDP. When financial assets are subtracted from these gross figures, we get the value of outstanding JGBs, still a worrying 129%.
It is only when we look at the government bonds in private hands that we get a realistic picture of what is driving market forces. As of September 2011, 45% of JGBs were in non-goverment hands, equivalent to 61% of GDP. This is a very different story from the first number of 225%.

The future is not rosy, but not so gray, either.

Arthur Alexander