It is beginning to look like debt cancellation, which Andrew Capon very amusingly discussed in his Christmas essay in Euromoney, "A Christmas Carol fit for a King," ( Inside Investment, Dec 2012 ) is the only way out for Japan and those other countries that aspire to be like Japan.
It's really a painless solution that involves no austerity and benefits everyone. The central bank simply buys government debt and cancels it, thus reducing the stock of government debt. Interest rates stay low because a shortage of debt is created. No government expenditures need to be curtailed and it is not necessary to raise taxes. (Tax could be reduced, in fact.) Inflation is avoided because households remain burdened with debt and their spending is restrained.
So when does the debt cancellation start?
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