Economic conditions in Japan may signal dire news for the world

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Japan is the most indebted nation on Earth, with debt above 225 percent of GDP. This year's budget deficit will be at least $480 billion. Despite interest rates running at almost zero, Japan has been able to finance its gargantuan debt because Japanese savers loyally buy it.

But how long can they afford to do so? Japanese used to be among the world's most thrifty savers. But over the last five years household savings are running at less than 2 percent of disposable income, less than half the already low U.S. level.

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Japan is now running a trade deficit. For the first half of fiscal 2012 through September, Japan logged about $40.6 billion in goods trade deficit, up 90 percent from a year earlier and the biggest since the Finance Ministry began recording in 1979. In September alone the deficit topped $7 billion, the third consecutive month of red ink.