World Rankings Switch: Germany Reclaimed Top Spot as Global Lender, First Time in 34 Years Above Japan
Germany Regains Status as Top Global Creditor
Germany has surpassed Japan to reclaim its position as the world's largest creditor nation, as reported by Bloomberg. The German government now boasts net foreign assets amounting to €3.48 trillion, while Japan's assets stand at €3.26 trillion.
Germany's impressive feat in 2024 can be attributed to a significant increase in its net foreign assets by €248.7 billion, thanks to extraordinary trade performance. This surge was driven by robust exports and a favorable trade balance, bolstering Germany's position on the global stage.
Moreover, the euro appreciated by approximately 5% against the yen in 2024. This currency shift enhanced the value of German overseas assets when measured in yen, making Germany's net external assets appear comparatively higher.
Japan, on the other hand, posted a record high in overseas assets due to a weaker yen that boosted both assets and liabilities, albeit unevenly. However, Japanese companies continue to invest heavily abroad, particularly in the US and UK. While this trend contributed to the overall increase in Japan's foreign assets, the currency shift slightly eroded its comparative advantage against Germany.
Japan's Finance Minister, Katsunobu Kato, has downplayed the importance of the shift in rankings, stating that Japan's net foreign assets have also been steadily increasing. He qualifies that the rankings alone should not be interpreted as a significant change in Japan's position.
Sources:[1] Bloomberg - "Germany Overtakes Japan as World's Largest Creditor"[2] Financial Times - "Germany's Trade Surplus Fuels Net Foreign Assets Boost"[3] Reuters - "Currency Fluctuations Drive Germany's Net External Assets Growth"
In 2024, Germany's superior trade performance and favorable exchange rates led to an increase in its net foreign assets in finance, making its business position more robust compared to Japan. Meanwhile, Japan's overseas assets also increased due to weaker yen and foreign investments by its companies, but the comparative advantage against Germany was slightly eroded.
