Why Japan is able to sustain massive debts while Greece and Italy can't?

This is another interesting question I came across on Linkedin. The question touched upon two topics:

1. Why is Japan in massive debt in spite of a hard working, technologically strong economy?

2. More importantly, why Japan doesn't seem to be in that much pain as compared to Greece or Italy who are facing a similar debt (or even lower debt levels?

Why is Japanese gov. in debt? Simple and easy answer: Japanese Gov. is in debt because they have spent more than what they have collected in taxes. 

Why has that been so? Multiple reasons but few of the popularly known ones are: years of stagflation and the "lost decade" (and gov. spending to support the economy), demographics (decreasing working force and increasing pressure of non-earning old age pop.), and relatively strong Yen. 

But how come they are more comfortable than some of the other European countries with big debts? One of the primary reasons cited for Japanese lost decade and deflation is not that they didn't work hard enough but because they didn't consume as much and saved a lot. 

The massive domestic savings meant that the Japanese gov. could take all that public debt from domestic funds (national savings) and thus their debt is all domestic debt (debt in Yen, domestic currency) rather than foreign debt (debt in foreign currency) as in the case of European nations. European countries didn’t enjoy the luxury of domestic savings! 

The problem with Greece or Italy is that when they have to pay their debt they have to convert Euro in to some foreign currency which has negative impact on Euro and they do not have control over Euro as any other country would have on their currency. So Greece or Italy can’t pay off their debt at the expense of their currency (although it’s not that straight forward) as compared to some other nations like Brazil with control over their domestic currency. Individual European nations have very limited control over their monetary policy. 

Note: Japan will not have this problem at all as their debt is primarily domestic (in Yen). Japanese Gov. don’t have a problem in paying off their loan and particularly the interest as they can simply print more yen. 

Of course it will affect Japanese interest rate and exchange rate but it can be managed and at least they have greater control over it. So they can hold off any panic from their debtors for a longer duration. The same principle actually applies to US as well who have been able to hold off the debtors from panicking for all this while because of the status of USD as the international currency! So the foreign debts of the USA are also in USD! (local currency) :) 

Hope you found this helpful but in case you have any queries please feel free to drop me a note.