Yes, their debt is currently held locally. However, how long can that last? The Japanese government is trying harder to get ordinary citizens to buy government debt - which suggests that other sources have dried up.
Yes, actually the finance minister himself, Jun Azumi, said that "Japan had reached its limit in relying on debt and said he was aware the global community was watching him in light of the serious debt woes in Europe."
Moreover Debt-servicing is 21.9 trillion yen, a quarter of the planned budget of 90.3 trillion -a mind bending 51% of estimated tax revenue to service debt.
A full 49% of the budget will be financed by bonds. So only half the budget will be financed by taxes!
