What Level of Government Debt to GDP Ratio is Sustainable? I was reading that Japan has a debt to gdp ratio of 240pc and I cannot understand why this has not left the country "bankrupt"? From looking at this like an ordinary person this level would be completely unmanageable. Furthermore, considering Greece had problems with its national debt with a debt to gdp ratio of less than 200pc I am not sure how Japan has sustained significantly higher ratio for so long? Therefore my question is what makes a certain level of debt to gdp ratio sustainable? Also who does the government owe the debt to and does it matter who they borrow from? ie domestic vs international.

For interest see the following graph,
As you have pointed out: where it comes from is very important. As to the Japanese situation it is quiet different from the US position from example. In fact most of the Japanese debt is owned by Japanese people (90% of the current debt). More specifically the BoJ plays a big role as a buyer, and puts pressure on Japanese yield, which makes it cheaper for the government to issue bonds ! 

Another interesting point that is usually left by anlysts: Japan is the biggest creditor in the world. The country holds a net amount of about 3 trillion USD (367 trillion yen) of financial assets through the world, which makes Japan the first creditor worldwide (before China !).

An interesting further reading which gives other information on the Japanese debt under stress tests of the IMF (P.40): https://www.imf.org/external/pubs/ft/scr/2015/cr15197.pdf

You also might want to read this paper of Rogoff and Reinhart called "Growth in a time of debt": http://www.nber.org/papers/w15639 . It was really criticized but is a good first glimpse... Afterwards you might want to go a little bit deeper into the debt sustainability analysis of the IMF...

Edit


The reference of Rogoff is more an introduction to the comprehension of debt dynamic than an argument for the existence of a threshold than would reduce growth. On the controversy of the paper, like pointed out by @dv_bn, you can check this intersting article: http://www.newyorker.com/news/john-cassidy/the-reinhart-and-rogoff-controversy-a-summing-up
Thanks to @denesp: Whenever you see "first creditor" this usually takes public and private assets into account. However, if you want to analyze the public debt you should only take financial assets owned by the government (mostly T-Bills regarding Japan).
I add also an interesting article I have read about it, which was written by economists from the NY FED, check it out: http://libertystreeteconomics.newyorkfed.org/2016/06/the-rapidly-changing-nature-of-japans-public-debt.html#.V2qJW2r2aM8