Going into 2011, Absolute Return Partners named a Japanese debt crisis as a high probability, high impact risk. But in their latest letter, this risk has been downgraded to low probability thanks to post-quake reconstruction (via Prag Cap):
Even the most tragic news (and events in Japan could not have been any worse on a human level) has a silver lining. When the initial effect on the economy, which is undoubtedly negative, has worked its way through the system, we actually believe that Japan’s economy will benefit from recent events. At the same time, the Japanese will pull together and, if necessary, repatriate billions of dollars to fund the re-building of the local economy. It is quite simply in their DNA to do so. Ironically, we therefore believe the probability of a Japanese fiscal crisis has diminished as a result of the earthquake and the ensuing tsunami – at least within our stated timeframe of 12 months.
Note that this refers to a debt crisis in 2011. Longer term, it’s hard to see how pulling together can lift the debt burden.