Olivier Blanchard, former chief economist at the International Monetary Fund, said zero interest rates have disguised the underlying danger posed by Japan's public debt, likely to reach 250pc of GDP this year and spiralling upwards on an unsustainable trajectory.

"To our surprise, Japanese retirees have been willing to hold government debt at zero rates, but the marginal investor will soon not be a Japanese retiree," he said.

Prof Blanchard said the Japanese treasury will have to tap foreign funds to plug the gap and this will prove far more costly, threatening to bring the long-feared funding crisis to a head. 

"If and when US hedge funds become the marginal Japanese debt, they are going to ask for a substantial spread," he told the Telegraph, speaking at the Ambrosetti forum of world policy-makers on Lake Como.