Japan loses status as a larger creditor after 34 years and is overtaken by Germany – Observer

Japan lost to Germany, after 34 years, the statute of the world’s largest creditor, although its liquid external assets reached a record in 2024, in part due to the depreciation of Iene, the Japanese authorities announced on Tuesday.

Japan’s net international investment position last year increased 12.9%, in annual termsto 533.05 billion yen (3.28 euros), for the first time above 500 billion yen (3.08 billion of euros), but below the value of Germany’s external assets, which rose to 3.5 billion euros at the end of 2024, according to German Central Bank data.

The depreciation of IENE has increased the amount of assets in foreign currency in Japan, including shares, obligations and other investments, once converted to local currency, but in fact reducing the amount of net assets, said Japanese government spokesman Yoshimasa Hayashi at a press conference.

The weakening of the yen contributed to the increase of both assets and external liabilities, but the assets grew at a faster pace, driven partly by expansion of Japanese business investment abroad.

Generally speaking, data reflect broader trends in foreign direct investment. In 2024, Japanese companies kept a strong appetite for foreign direct investment, particularly in the US and the United Kingdom, according to the ministry.

Sectors such as finances, insurance and flap attracted significant capitals from Japanese investors, according to the ministry.

Germany also benefited from a high surplus of the current transactions balance last year, of 248.7 billion euros.

The surplus of the Tokyo current transactions balance ascended to 29.26 billion of yen (180.22 billion euros) in the same period.

Hayashi minimized the importance of this value, noting that Japan’s position in this area remains strong: “Liquid assets are increasing despite the worldwide classification, since the situation [económica] From Japan did not change, ”he said.

Germany destroyed China as the world’s second largest creditor in 2015when the Asian country made a heavy investment to contain the fall of Yuan.

In 2023, the European country relegated Japan to the fourth largest economy in the world.

The report of the Japanese Ministry of Finance, released on Tuesday, on the country’s credit capacity also shows that net external credit increased by 2024 for the seventh year, rising 11.4%, in annual terms, in total assets to 1,659.02 billion yen (10.23 billions of euros), driven by direct investment in the United States by financial institutions and commercial houses.

External liabilities increased by 10.7% to 1,125.97 yen billion (6.94 billion euros).

The yen was quoted at 157.89 compared to the US dollar at the end of 2024, 11.7% lower in annual terms.

Looking to the future, the trajectory of foreign investment will depend on Japanese companies continue to expand their investments abroad, especially in the United States.

With US President Donald Trump’s tariff policies, some companies may be encouraged to move production or transfer assets to the United States to mitigate trade-related risks.