The Achilles heel of every over-leveraged sector – but especially the sovereign sector – is interest rates. Specifically, high interest rates.
For example, it's estimated that if Japan's average borrowing rate rose to a mere 2%, then 100% of all tax receipts would be consumed by the interest payments alone. Now, Japan is a long way from that threshold, as even its 30-year bond is safely below 2%, its two-year paper yields a measly 0.09%, and its ten-year paper goes at 0.69%.
(Source)
Can you imagine that? Parking $100,000 with the Japanese government for ten years and receiving a paltry $690 dollars back each year?
Not only does this not compensate you for the extraordinary risks that the Japanese government under Abe is taking with its never-before-tried monetary policy – one that specifically seeks to devalue the yen, hopefully in an orderly fashion (but maybe not is the point), so that your money is officially losing value faster than 0.69% per year. Why would any sane investor want to do this?
Fastest Japan Inflation Since ’08 Stokes Wage Pressure
Dec 27, 2013
Japan’s inflation accelerated to the fastest pace since 2008 last month, bringing the rate closer to policy makers’ target while threatening to erode household spending power unless employers boost wages.
Prices excluding fresh food rose 1.2 percent from a year earlier, the statistics bureau said today in Tokyo
Food prices rose 1.9 percent in November from a year earlier helping to boost the overall consumer price index by 1.5 percent, according to today’s CPI release.
(Source)
With inflation in Japan running at 1.5% and climbing higher and faster than expected, your $100,000 is losing $1,500 per year in purchasing power. Of course, actual inflation is likely to be far higher than official statistics, because Japan plays the same games as the U.S.
by kelvinator 
