His recent post titled "Spotlight on Japan" is loaded with hard data, snippets from the media regarding Japan's economy, and his own insights regarding Japan's situation (most of which I agree with.
Mish begins by posing the question "is Japan a nation of savers?" He says no, and gives some facts to back up that assertion. These facts include: that Japan has the highest ratio of national debt to gdp of any country by far; that Japan's national debt is the equivalent of $7 trillion US dollars now; and that the Japanese government doesnt think it will be able to balance its budget until after 2010.
There is a quote included from a prominent economist to the effect that Japan is still the world's single biggest creditor nation. Granted, Japan still holds a lot of US treasury debt but has maintained its government budgets by issuing skyrocketing amounts of its own debt. So they have become a debtor nation. Hence the issue that Mish discusses where if the Ministry of Finance raises interest rates that will drive foreign holders of Japanese debt to sell, driving interest rates up further and potentially choking off gdp growth. Japan should have paid for its government spending by selling the US securities but of course that would have driven up the price of the yen thus hurting exports.
In my view, the Japanese government needs to spend less and save more; and the average Japanese citizen needs to spend more and save less. Domestic consumption needs to be a greater proportion of Japan's GDP than it is now. Of course, that will be hard to accomplish with a rapidly shrinking population.