By Denise Roland, the Telegraph

US hedge fund heavyweight Kyle Bass has warned that Japan is careering towards a major debt crisis.

Mr Bass, founder of $1.8bn hedge fund Hayman Capital, said some of Japan's measures to boost growth in the deflation-dogged economy amount to "adding a Ponzi scheme to a Ponzi scheme".

He cited as one example the Japanese government's use of a new form of debt known as Japanese compensation bonds, which Tokyo plans to repay through funds raised from future tax reforms.

Mr Bass, who famously made millions betting against the subprime mortgage bond market, has been shorting Japanese debt in anticipation of the country losing control of the bond market.

Speaking at the Ira Sohn investment conference in New York, the Texan financier warned that all the elements are in place for a debt crisis, and that it is now a matter of when.

"The beginning of the end has begun," he said.

Mr Bass, a longstanding pessimist on Japan, has previously described the country's combination of the world's highest debt-to-GDP ratio, persistent trade deficit, low foreign investment and declining population as a "vicious cocktail" which is on the brink of falling apart.

He warned last year that the country had "crossed the proverbial rubicon" as it moved to devalue its currency by increasing the money supply, a strategy which he says, could see a US dollar - which currently trades at around 98 yen - worth more than 120 yen over the next two years.

"[Shinzo Abe] doesn't even know what he wishes for because if he gets there he detonates his debt bomb," said Mr Bass in November, weeks before the new Japanese premier swept to power on vows to do everything possible to get to 3pc inflation.

Since then, Bank of Japan has gone even further with plans to double the money supply within a year.

Elsewhere in Asia, signs of sluggish growth continue to fuel doubts about the strength of a global economic recovery.

The Bank of Korea on Thursday became the latest in a long line of central banks to trim its benchmark interest rate in a bid to boost the economy. It pruned its rate by 0.25 percentage points to 2.5pc, the Bank's third cut in a year, weeks after lowering South Korea's 2013 growth forecast to 2.6pc, from 2.8pc.

In a statement, the BoK said that while a moderate US economic recovery had continued, the sluggishness of economic activity in the eurozone had "deepened".

Meanwhile in China, inflation figures fell below the government's 3.5pc target. Consumer prices rose 2.4pc in April compared with the same month last year.