[jmherbener]

Credit markets are worldwide. Therefore, every borrower of a particular uncertainty group and maturity of loan, pays the same interest rate. The reason Japan is not in a higher uncertainty group and Greece is (and therefore, Greece pays a higher interest rate) is that the Greek government has made other huge budget commitments that the Japanese haven’t and the Greek government is at the limit of its taxing ability. Investors think it more likely that Japan can pay off it debt given the paucity of its other budgetary items and the greater likelihood of Japan actually collecting higher taxes in the future. The prospects for economic growth in Japan, which expands the tax base, are greater than in Greece.