Japan and the US, as the two largest economies with high deficits, also have the largest gross financing need, ahead of all of the euro zone periphery, Belgium and France. But they are sovereign in their currencies and have therefore not been part of the sovereign debt crisis.
The analysis by Pimco on British National Solvency last year is applicable here as well:
Q: PIMCO has identified sovereign risk as a key theme for 2010. How significant is this risk for the UK relative to the eurozone?
Amey: Sovereign risk is a key risk for the UK but in a slightly different way to the economies of continental Europe. The UK government deficit, which is currently running at around 11% of GDP, is one of the highest both on record and within the developed world. That creates a potential risk as regards to the ability of the government to finance its debt. However, unlike countries within the eurozone, the UK has the advantage of an independent floating currency, making it highly unlikely it will suffer the problems currently besetting parts of the eurozone. With its own currency, the UK will always have the ability to repay its debts, but it may devalue the debt in real terms when viewed in non- GBP terms. Therefore, UK sovereign debt risk will continue to be an issue as long as UK debt levels remain high, which in turn will put pressure on the currency and the inflation rate, and potentially erode the longer-term value of government debt. [underlining added]
Currency revulsion that results from financial repression for a monetarily sovereign government expresses itself as currency depreciation first, and not via interest rates until inflation from money printing and currency depreciation force policy rates higher.
(Hat tip Global Macro Monitor).