The Japanese economy has witnessed two long decades of stagnation. In a bid to revive economic growth, the Japanese Prime Minister has taken some extreme and highly risk steps. As we have said earlier, the Bank of Japan has pledged to double its monetary base.

Ever since the announcement, the financial markets have gone topsy-turvy. Excessive money supply tends to inflate asset prices. As a result, the Japanese stock markets have gone rallying. On the other hand, the Japanese yen has fallen sharply against the US dollar.

Will these measures lift Japan's economy? For one, theoretical expectations do not often translate to real outcomes. Moreover, such high-risk gambles as Japan's monetary stimulus come at a huge price. And they could have unintended far-reaching repercussions.

Some signs are already there. Interest rates on 10-year government bonds have gone over 1% for the first time in a year. Ideally, money printing should result in suppression of yields. But some recent comments by the US central banker raised hopes of retiring the QE3 program. This severely impacted Japanese markets.

The Japanese government is overburdened with debt. As such, a sustained increase in interest rates would severely jeopardise its finances. Any major financial shock arising out of such a situation would ruin the Japanese economy.