The debt laden U.S, U.K and Japan have one thing in common - their debts are denominated in their own currencies. Their currencies should depreciate in value, but it is unlikely they default on their debts anytime soon (that is, unless their central banks' printing machines are destroyed).
As their currencies depreciate in value (i.e. inflation), their ability to service their debts actually increases (while the peripheral countries of Europe cannot 'inflate away' their debts). So it is misguided to simply compare, for example, CDS spread of the UK Gilt with that of Italy or Spain (let alone comparing it with CDS spreads of corp. papers).
It makes sense to me when Faber says 'Rather than shorting JGBs, a better way to capitalize on Japan’s dismal future fiscal position could be to simply go long Japanese equities and short the Yen. As in the case of Mexican stocks between 1983 and 1988 the appreciation of Japanese equities should in future exceed the likely weakness in the Yen.'
