A quarter of Japan’s population is more than 65 years old – three times the world average. Tax revenues have been falling since 1990. Meanwhile, total government expenditures, according to the Ministry of Finance, have leapt by $300bn or so since the financial crisis, helping gross private and public sector debt to an equivalent of five times gross domestic product. Surely, a recipe for rising bond yields and a bombed-out yen, right?

Wrong. Japan’s currency has been one of the strongest this year, up about 6 per cent against the dollar, twice that versus the pound and almost a fifth higher in euros. Nominal government bond yields are where they have always been: close to zero.

Many have been caught off-guard by the flying yen, not least because Japan’s economy looks as sick as others causing fright. In addition, there has long been a close link between Japan’s balance of trade and the yen/dollar rate. When the balance deteriorates, so does the currency. But since the financial crisis a reduced balance has been ignored by the yen, now trading at 87 to the dollar. History suggests that it should be closer to 130.

Three explanations stand out. First, the yield spread between US and Japanese two-year bonds – which has second-guessed the yen/dollar rate well for three years – remains near record lows. Second, portfolio money has been gushing into Japan. Net equity inflows for the first four months of this year, for example, were running at the fastest rate since 1996, according to Morgan Stanley. Third, investors panicking about the eurozone or US profligacy had to buy something when selling euros and dollars.

Mrs Watanabe is having none of it. Retail punters are simply selling into strength – margin accounts with short yen, long Australian dollar positions, for example, are at the highest levels since January 2007, according to JPMorgan. It is not just Japanese exporters gunning for a weaker domestic currency in the second half of the year.