But by printing money they'd wipe out (or at least reduce) the real value of their peoples' savings - basically all those bonds the Japanese people bought. The consequences would be borne by their own people, not some foreign banks. This may be politically unpalatable.

There are limits to how much you can print without creating a currency crisis. http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hype...

You can pursue an economic policy that creates high levels of inflation without necessarily triggering hyperinflation. The goal of course would be to gradually inflate away the value of the debt, not to pay it all back immediately.

Wouldn't that wipe out the very same people who invested in Japan? There are a lot of regular Japanese people who hold Japanese debt. Wiping it out via inflation is equivalent to wiping out the wealth of regular Japanese people to save the Japanese government.