Japanese Government Bonds are an important source of repo collateral – they serve a purpose beyond the considerations of debt sustainability & coupon payments.
Low interest rates don’t mean that creditors will keep lending to a country. So why are creditors willing to roll over Japan’s debt at ultra low interest rates?
There is another reason interest expense must be used when understanding debt sustainability – defaults occur when one fails to make interest payments.
The Debt/GDP ratio is the conventional way of gauging a country’s ability to repay its debt. However, just because everyone uses i9t doesn’t make it useful.