World no longer recognizes Japan as the largest national creditor
Japan ceded its position as the world's largest creditor nation to Germany in 2024, with the latter's assets reaching a staggering ¥569.7 trillion ($3.966 trillion), a more than 25% year-on-year increase. Japan's net external assets amounted to ¥533 trillion ($3.7 trillion), an 13% increase, falling short of Germany's record-breaking growth.
The shift in rankings was primarily attributed to Germany's robust trade balance and the euro's appreciation against the yen by approximately 5% in 2024. This enhanced Germany's external assets' perceived value in yen terms, making it seem larger than Japan's assets in the same currency.
Notably, Japan held the top spot since 1991, having surpassed Germany's net external assets at the time. However, Japanese Finance Minister Katsunobu Kato downplayed the significance of the decline, stating that the ranking should not be seen as a reflection of a substantial change in Japan's position, as the country's net external assets continue to grow.
Japanese companies continued to expand their investments in finance, insurance, and retail sectors in foreign countries in 2024, indicating a strong appetite for overseas investments, particularly in the U.S. and the U.K. The Trump administration's trade policies might have encouraged the relocation of production facilities and assets to the U.S.
In a broader context, this shift signifies evolving global economic trends, with Europe's influence increasing relative to Japan. While Japanese companies are actively making foreign investments, Germany's consistent surplus and asset accumulation have contributed to its ascendancy to the top creditor position.
The transformation in creditor nation rankings has highlightened the growing influence of Europe, particularly Germany, in the global economic industry, as Germany's robust trade balance and currency appreciation resulted in a significant increase in its finance assets. Despite Japan's persistent investment in foreign business sectors like finance, insurance, and retail, its net external assets growth pales in comparison to Germany, demonstrating the increasing dominance of Germany in the realm of global finance.
