> It's literally impossible for Japan to default on their debts, which are almost completely in Japanese currency.

False.

Many countries have defaulted on debt denominated in local currency. E.g. Brazil in 1990 and Russia in '98.

In Brazil's case, part of the debt was indexed to inflation, so inflating away the debt wasn't easy.

AFAIK most of Japan's debt isn't inflation-linked. Still, a high enough rate of inflation isn't substantially different from partial default.

PS: See the table on page 30. http://www.cass.city.ac.uk/__data/assets/pdf_file/0009/21997...