Japan has relinquished its position as the world’s largest creditor nation for the first time since 1989, according to newly released Finance Ministry data. While Japan’s net foreign assets grew 13% year-over-year to a record ¥533.05 trillion ($3.7 trillion) at the end of 2024, Germany quietly surpassed its Asian counterpart with ¥569.7 trillion in net claims on the rest of the world. China maintained its third-place position at ¥516.3 trillion, narrowing the gap with Japan to just 3.2% of the total.
The historic shift reflects two parallel trends: Germany’s persistent current account surpluses (averaging 7% of GDP since 2021) have compounded through euro depreciation, while Japan’s overseas investment returns face growing headwinds. Notably, Japan’s external assets grew primarily through FX valuation effects as the yen fell to 34-year lows against the dollar, rather than new capital outflows. The country’s direct investment abroad actually contracted by 4.8% in dollar terms as corporations repatriated earnings to offset weak domestic profitability.
The changing creditor hierarchy may influence sovereign debt dynamics, particularly for US Treasuries. Japan’s reduced surplus capacity helps explain its recent pullback from foreign bond purchases – its holdings of US government debt fell $42 billion in 2024, the steepest decline since 2013. Meanwhile, Germany’s expanded balance sheet could give the Eurozone greater influence over global capital allocation, though its conservative investment approach means most surplus funds continue flowing into high-grade European corporate debt rather than emerging markets. Analysts warn this realignment may reduce liquidity buffers for deficit-running economies as the traditional “Big Three” creditors (Japan-China-Germany) become less synchronized in their overseas deployments.
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