Myth: Japan can issue unlimited debt since the BOJ buys it, avoiding default. Truth: This isn’t a free lunch. Endless debt issuance has risks, even with central bank backing.

BOJ’s bond buying lets Japan pile on debt (>240% of GDP!). It covers interest & repayments, dodging default. But this “money printing” isn’t risk-free. The real danger isn’t default - it’s the yen.

If investors lose faith in Japan’s solvency - high debt, weak growth, bad demographics - they may dump JPY assets (bonds, stocks, real estate) and swap yen for USD, EUR, etc. This could crash the yen.

A collapsing yen would make imports (food, fuel, goods) crazy expensive for Japanese consumers. Even if BOJ’s printing avoids direct inflation, a currency collapse would spark a brutal inflation spike.

Japan’s risk is REAL. Debt load and BOJ policies make JPY vulnerable. A sellers’ strike in 30y-40y bonds (yields at 3.15% in May 2025) signals trouble.

BOJ holds $1.23T in FX reserves (30% of GDP, Dec 2024) to prop up JPY by selling foreign bonds. But reserves aren’t infinite. If selling pressure overwhelms, JPY could devalue, spiking inflation.

Is Japan’s collapse imminent? No. The risk is real, but predicting if or when is tough. Hefty reserves help, but the debt-currency-inflation trap is a ticking bomb. Timing’s the hard part.

Takeaway: Unlimited debt + central bank buying isn’t a free lunch. Turkey and Zimbabwe show how currency crashes ignite inflation. Japan’s JPY faces this risk if faith fades. It’s serious but difficult to predict.