In a realistic scenario you would expect an attack to come. At least that there is a chance of the attack coming. Of course there are different types of military exercises. But a lot of them take place over a longer period of time and the enemy can attack at any point. A good strategy for the exercise is to avoid attacking at the start of the exercise to allow the defenders to settle into their positions a bit. The exercises also tend to include multiple potential attack vectors, either multiple objects being protected or that the attacks can come from multiple angles. The defenders will therefore not know if their position will be attacked at all. Again a common tactic is to initiate an attack on one vector hoping the defenders will redeploy to this area only to have the main attack come in at another vector. The defenders do not know which is which.

As for the fear of life this is somewhat of an issue. Obviously you can not go around killing people for military exercises. But you can make them lose face. The exercises will have referees who will look at an engagement and tell you the outcome. The exercises is more about movements, tactics and logistics rather then shooting skills. So you can let the soldiers fire a few blanks at each other and then go tell them who won. If a referee is not present the soldiers and commanders will do a fair assesment of the engagement for themselves. Getting "killed" in such a way is a bit of an embaresment that you want to avoid and the next time you will do better.

That being said you want soldiers to be fearless in battle and sacrifice everything for a victory, even their own lives. In fact soldiers tend to be more motivated by war then by exercises. So the problem is not that solders do not fear death in an exercise but that they fear having to go through all the pain of battle without actually winning anything important. Are you willing to march for days in heavy rain and mud carrying heavy gear and eating cold meals only for a general to tell your batallion you did a good job? Are you willing to go thorugh all that in order to defend your country from foreign invaders even though it means you might be killed at the end of it?