What Japan should do

Japan needs a weaker currency.  Here is what it could do.

1.  Set up a unit (Unit A) to openly buy dollars on the open market with newly created yen, in fairly large amounts.  Say $2 billion/day (about 160 billion yen/day).  This should gradually weaken the yen.
2.  Give the money to Unit B, to buy up useful assets, say US government debt and gold.

This would have the effect of causing a little inflation.  However, it would also cause interest rates to rise, causing the deficit to soar.  This would also help bondholders, who should be happier with more interest.  It would also make Japanese debt worth less.

3.  Now, these assets should be given to Unit C, which would sell them to buy Japanese debt. Hopefully there would be enough assets here to counteract the rising interest costs. 

The net-net effect should be 1) a weaker currency, which would help exports, and get Japan out of the slump it is in; 2) debt which is cheaper to pay back, because of the weakened currency. 3) the deficit is taken care of with the additional assets purchased.  Boom, problem solved.  With higher inflation and interest, the bank could engage in normal operations (raising interest rates) to control inflation.

So, from the standpoint of a foreign investor, it would be dumb to buy yen right now.  And Kyle Bass will get his short on the debt.  But the Japanese economy won't collapse, to the contrary, it should recover to normal.