A large portion of the Mitsubishi Corp pension fund is invested in Japanese government bonds. And for many years, it has been a profitable investment as yields on 10-year JGBs dropped down to their current level of about 1 per cent.

But can the long rally in JGBs continue. At this point, there isn't much more potential upside - and with every point drop in yields, the potential downside looms larger.

One person involved in the management of the big trading company's fund says that falling yields enabled it to enjoy big profits. But he concedes this will be very difficult in the future.

Indeed, a growing number of market players that investment in JGBs in future will be far more risky than in the past.

Foreign investors have long been cynical about the market, (albeit to their detriment). But today - for the first time - a growing number of Japanese investors are joining the doubters. Even some government finance and Bank of Japan officials are beginning to make cautionary noises.

One BoJ official points to current low and stable JGB yields. But he warns that Japan should not count on this state of affairs forever, adding that if people think Japan does not have the will to deal with its deficit, JGB yields will be affected.

Recently, for example, Sumitomo Mitsui Banking Corp, which has a strong risk management culture, began to shift its investment strategy. Today, almost all of the bank's holdings of JGBs are either one or two-year holdings, out of a fear that yields cannot remain at these low levels forever.

One senior government official says he believes the JGB market will remain stable for the next year or two but warns that the fiscal situation will collapse in several years.

The maths are sobering. By the end of the year, Japan's fiscal deficit will total about 200 per cent of gross domestic product, swelling to about 300 per cent by 2014, according to Masaaki Kanno, chief Japan economist for JPMorgan in Tokyo. So far, though, those alarming numbers have been offset by household and corporate savings.

But by 2015, Mr Kanno notes, domestic private savings will fall short of the fiscal deficit. Indeed, today, the savings rate - at 2 per cent - is below that of traditionally profligate US households.

Moreover, Mr Kanno expects Japan's current account surplus (once the source of so much friction with the US) will have totally evaporated soon after.

David Fuller's view Japan is a resourceful, inventive country but it has had an ossified, somnambulant government for decades. Political leadership in Japan resembles a game of 'pass the parcel', evidenced by 15 prime ministers since 1989. Japan's weak economy is testimony to an opportunity squandered; as Asia's first developed economy it should have boomed given regional GDP growth.

I do not know how this will play out but I suspect something is about to give. Also, if Japan moves significantly down the path of quantitative easing, as seems likely, its economy may lurch at some point from deflation to inflation. I see at least three early warning fault lines for us to watch: the yen (shown here as USD/JPY) (historic, weekly & daily) which is far too strong given the deflation; JGBs (historic, weekly & daily) where yields are unsustainably low; the Topix Banks Index (historic, weekly & daily) which has a sickening overall downward trend.

Henny Sender mentions in the latter portion of her article that JGBs account for 65 percent of Japan's bank assets. Ouch!