Japan downgrade: The beginning of the end?

http://finance.fortune.cnn.com/2011/01/27/japan-downgrade-the-beginning-of-the-end/

Two years ago I was pounding the table about Japan circling the drain, and was labeled a doomsdayer.   Today, CNN and Fortune Magazine are reporting it.  That's about as mainstream as one can get.

One subtle clarification of the otherwise well-written article is in order.  The author mentions that owners of Japan government bonds (JGB) are the following:

Money manager Vitaliy Katsenelson and Devin Stewart, a senior director at the Japan Society in New York and a Carnegie Council Senior Fellow, agree with Bass. The way they see it, Japan has never meaningfully flirted with a loan default because it has always been able to borrow money from its own life insurance companies, pension funds, and banks.

While it is true that financial institutions are buyers of JGB, they are merely custodians.  The real owners are Japanese citizens who have had said JGB jammed down their throats by a corrupt government, enticing them to take on outsized risks by lending to a bankrupt nation in exchange for minuscule returns of 1% (or less, in some cases).

As noted in the article, the end game will not be pretty, as other developed countries will also encounter this demographic and fiscal problem--including the UK and the US.