I always like to monitor credit default swaps to get an idea of the markets pricing of credit risk. I have noticed that the market is slowly but steadily continuing to believe that Japan’s credit is becoming more risky. Above is a chart of Japan’s 5 year credit default swap. As you can see it is hovering close to 3 year highs. Is something brewing in Japan? If the market begins to believe Japan cannot pay its debts the global economy will be in a world of pain.