Japan’s Ministry of Finance released the latest data on Tuesday, revealing that as of the end of 2024, Japan’s net external assets reached 533.5 trillion Japanese yen (3.7 trillion US dollars), setting a new record high and surpassing 500 trillion yen for the first time. However, it still falls short of Germany’s 569.6 trillion yen (3.96 trillion US dollars), losing its position as the “world’s largest creditor nation” that it has held since 1991.
Despite slipping to second place, Japan’s net external assets saw a year-on-year growth of 12.9%, marking the seventh consecutive year of hitting a historical high and demonstrating the country’s strong international asset accumulation capabilities.
Net International Investment Position (NIIP), as defined by the Ministry of Finance, refers to the total value of a country’s external assets minus external liabilities, reflecting the country’s net creditor position in the international financial system.
According to the ministry’s data, Japan’s total external assets at the end of 2024 amounted to 1659.2 trillion yen, up by 11.4% compared to the previous year, while external liabilities stood at 1125.97 trillion yen, marking a 10.7% annual increase.
Despite reaching a record high in total value, Japan has been surpassed by Germany due to changes in exchange rates and international balance of payments structure, supported by consecutive years of trade surplus and current account surplus. China ranks third with 516.3 trillion yen (3.59 trillion US dollars), followed by Hong Kong with 320.3 trillion yen (2.23 trillion US dollars), and the United States with a staggering 4109.26 trillion yen (28.55 trillion US dollars) in net external liabilities, maintaining its position as the world’s largest debtor nation.
One of the main reasons for the significant increase in Japan’s net external assets is the depreciation of the yen. By the end of 2024, the exchange rate of the yen against the US dollar was 1 USD to 157.89 yen, marking an 11.7% depreciation from the previous year, leading to an increase of approximately 11.09 trillion yen in yen-denominated valuation of foreign currency assets. Simultaneously, foreign currency liabilities valuation also increased by 2.8 trillion yen.
Furthermore, Japanese companies have shown an active trend in overseas investments. The Ministry of Finance pointed out that direct investments to the United States and the United Kingdom significantly increased in 2024, particularly in industries such as finance, insurance, and retail. These changes indicate a shift for Japan from the past focus on “securities investments” towards a more proactive strategy of mergers and acquisitions and overseas expansion.
Regarding Japan’s ranking changes, Finance Minister Katsunobu Kato stated after a cabinet meeting that Japan’s economic status should not be judged solely based on rankings. He emphasized that Japan’s net external assets continue to grow steadily, and changes in rankings do not indicate a decline in national strength.
Daisuke Karakama, Chief Market Economist at Mizuho Bank, mentioned to Bloomberg that Germany’s ability to surpass Japan is mainly due to its significant trade surplus, highlighting fundamental differences in the economic structures of both countries. He emphasized the importance of focusing on the composition of external assets rather than changes in rankings, noting that with over half of Japan’s investments now in the form of direct investments, it becomes more challenging to swiftly repatriate funds back to the country in times of increasing market risks.