While all are watching Greece and the ECB snowballing bonds and guarantees at each other and their bailed out banks it is worthwhile to take a look far East: Japan is up for trouble - and at the same time tells us what the chances of an economy are that since the nineties has never really made it out of deflation. One stimulus package after the other built up unbelievable sums of debts that have driven the country into a solid cul-de-sac.
We estimate that if the market demands an interest rate of anything more than 3.5% then Japan will not have the revenue to service its debt. In other words, as the interest rate approaches 3.5% Japan must use all its tax revenue to pay interest on its debt.
More details here.