Standard & Poor’s downgrade of Japan’s credit rating raises a disturbing prospect. Is this stage two of the global credit crisis, featuring a chain of sovereign defaults among the largest economies? No less a figure than Kaoru Yosano, Japan’s new minister for economic and fiscal affairs, seems to think so. “We face a dreadful dream,” he told the Financial Times last week.

After the disasters of 2008, such fears are understandable, but misguided. The risk is they lead to policies that, far from solving the world’s economic problems, make them a whole lot worse.

The case for the prosecution is simple. Japan’s ratio of government debt to gross domestic product is above 100 per cent and shows no sign of declining. The political system seems gridlocked, with a succession of uninspiring leaders coming and going with bewildering rapidity.