Japan lost its position as the world’s largest creditor nation for the first time in 34 years, despite posting a record amount of overseas assets.
Japan’s net external assets reached ￥533.05 trillion (US$3.7 trillion) at the end of last year, rising about 13 percent from the previous year, data released yesterday by the Japanese Ministry of Finance showed.
Although the figure marked an all-time high, it was overtaken by Germany, whose net external assets totaled ￥569.7 trillion. China stayed in third place, with net assets of ￥516.3 trillion. Japan began its streak at the top by overtaking Germany in 1991.
Photo: Bloomberg
Germany’s ascent reflects its substantial current account surplus, which reached 248.7 billion euros (US$282.2 billion) last year, largely due to a strong trade performance.
Japan’s surplus in turn was ￥29.4 trillion, according to the finance ministry, equivalent to about 180 billion euros.
Last year, the euro-yen rate rose around 5 percent, exaggerating the increase in German assets versus Japanese assets in yen terms.
Japan’s status as the world’s biggest net-creditor nation was a consequence of decades of current account surpluses that saw Japanese investors and companies load up on holdings abroad. Losing the title suggests that while Japan’s assets continue to rise, real demand has been stronger in other nations, including Germany and China.
A country’s net foreign assets are the value of its overseas assets minus the value of its domestic assets that are owned by foreigners, adjusted for changes in currency values, and the figure is essentially reflected in the cumulative change of the country’s current account.
Japanese Minister of Finance Katsunobu Kato yesterday signaled that he was unperturbed by the development.
“Given that Japan’s net external assets have also been steadily increasing, the ranking alone should not be taken as a sign that Japan’s position has changed significantly,” Kato told reporters.
For Japan, a weaker yen contributed to increases in foreign assets and liabilities. However, assets grew at a faster pace, driven in part by expanded overseas business investment.
Yesterday’s data generally reflect broader trends in foreign direct investment.
Last year, Japanese companies maintained a robust appetite for foreign direct investment, particularly in the US and UK, the ministry said.
Sectors such as finance, insurance and retail attracted significant capital from Japanese investors, it said.
Looking ahead, the trajectory of outbound investment might hinge on whether Japanese firms continue to expand their overseas spending, especially in the US. With US President Donald Trump’s tariff policies in effect, some companies might be incentivized to relocate production or transfer assets to the US to mitigate trade-related risks.
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