I think the person arguing that Japan debt is sustainable is missing one large point (when saying Govt debt at any level is ok as long as its in the issuers currency)

Besides the devaluation impact from the central bank being required to keep expanding the money supply (via bond purchases).. The central bank also has to keep bringing rates down so the interest cost do not get larger than the govt tax revenue..

The problem here is that as the central bank lowers bond yields (and prices rises) .. prices on other assets also rise on a relative basis.

In Japan the buyers of JGB are the pension funds / life insurers / banks and postal funds.

As the population is aging the payouts to the clients of these domestics is increasing and the amount of people investing is decreasing. This would not be a problem if the Govt did not require near zero rates. But at current levels domestic pension funds / lifers and other insurance companies cannot get adequate returns to meet the cash flows required.

Thus most are losing money and it will be the bankruptcy of a major pension fund or lifer that will lead to the selling off in JGB's.. and it will be caused by the BOJ (and Govt) leaving rates to low so savers (ie pension funds ect) cant get the returns to survive.

So low rates are not just about Govt funding costs they also bankrupt pension funds ect.. (see US local govt pension funds that are running into the same issue) The required say 5-7% return to meet payments that had been promised and thats just not possible thus the go bankrupt.

this is the key problem with zero rates apart from the inflation effect.. It will not work. Market rates should come back so pension fundes ect can pay their holders what they deserve on their savings and the Govt needs to fund it self according to reality and stop stealing these peoples' money a little at a time to furnish their own interests.

ie stocks could be a possible alternative but as we have seen the excessive liquidity caused by bond buying keeps stock prices high and yields low,. so even though they are a bit better.,, its not stable enough and the price is always vulnerable because it is only sustainable due to QE.

Again the central banks should step back let stock prices fall as well (so yields rise and investors can get market returns) IF some institutions. cant survive without zero rates (ie TBTF US banks).. Let them go under guarantee the deposits and move on so any fresh capital the central bank is supplying is going to viable entities that can put it into the real economy ... not get waisted on a unviable entity that can only survive buy borrowing at zero from the central bank (thus stealing the funds from pensioners ect..