The authors say that even-though the debt to GDP ratio in Japan is the highest in the world, interest rates have been low. What explains that? They say that a possible explanation is that a large portion of the debt is owned by Japanese who basically feel confortable with low yields. That however is unsustainable and corrective measures are necessary.
The authors argue in the conclusions:
The Japanese government debt is clearly unsustainable without a drastic change in fiscal policy. The interest rates of Japanese government bonds, however, have been low. Market participants do not seem to worry about the problem of high and rising debts. The continuing low JGB yields may reflect the market’s view that the ample amount of private sector financial assets in Japan will always be there to absorb additional JGBs, but the current calm situation may not continue. The rapid aging of the Japanese population means that the growth of private sector savings is slowing down and eventually will turn negative. The Japanese government cannot rely on the private sector to continue buying JGBs beyond a certain point. (p. 19).