By Andrew B. Busch, CNBC Contributor

NEW YORK ( CNBC) -- Today, Japanese Finance Minister Noda said that Japan would use its existing euro foreign exchange reserves to buy a large portion of the bonds issued by the European Financial Stability Fund. "There is a plan for the euro zone to jointly issue a large amount of bonds late this month to raise funds to assist Ireland. It's appropriate for Japan to make a contribution as a leading nation to increase trust in the deal. We want to buy more than 20 percent."

Japan joins China in pledging to buy European debt to quell the uncertainty surrounding the sovereign debt and bailouts. Last week, Chinese Vice Premier Li Keqiang pledged to buy Spain's debt and expressed confidence in Spain's financial markets. It appears to be a global effort to stabilize the European debt situation and more nations may be participating. (Rumors were that Brazil was buying Portuguese debt, Fin Min Mantega denied the reports.)
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The major question is whether the United States will bow to international pressure and join the debt buying party.

It is no coincidence that French PM Sarkozy was in D.C. yesterday meeting with President Obama. "I've always been a great friend, a tremendous friend of the United States and I know how important a role the U.S. plays in the world, how important the U.S. dollar is as the world's No. 1 currency," Sarkozy told reporters.

Sarkozy did not publicly repeat his call for starting to wean the world off decades of dollar-dependence, but talked more generally of the need for forge ahead with "new ideas for a new century" to promote economic stability according to Reuters.

As the incoming head of the G20, Sarkozy would achieve a major accomplishment if he could convince President Obama to aid Europe in their time of need. However, tapping the American taxpayer for the funds is another matter and Congress is not likely to acquiesce. Given the size of the Fed's balance sheet, I wonder if there are any discussions on its use or swapping US Treasury debt for the new EFSF debt.

Again, it's not a coincidence that Ben Bernanke was asked repeatedly about what the Fed could purchase under its QE2 program when he appeared last week in front of the Senate budget committee.

Clearly, senators are worried over the Fed bailing out states like Illinois and California via purchasing muni debt.

Perhaps, the better questions would've been directed toward whether the Fed can buy sovereign debt?

For the markets, any indication that the US would buy European sovereign debt would lead to a big hedge trade: buy debt of the periphery and sell US Treasury debt. I don't believe action by the US will occur. However, who would've thought that Japan, the developed world's worst debt-GDP nation, would be helping out?

-- Written by Andrew B. Busch of CNBC
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