Why Japan Lost Its Position as the World’s Largest Creditor Nation to Germany After 34 Years

Japan lost its position as the world’s largest creditor nation to Germany in 2024. Japan’s net external assets rose 13% to ¥533 trillion while Germany reached ¥570 trillion. Japan’s net external assets, foreign investment trends, and Germany’s trade surplus reveal important shifts in global creditor standings in 2024.

Japan Loses Its Long-Held Status as the World’s Largest Creditor Nation

Japan’s net external assets reached an all-time high of ¥533.05 trillion (approximately $3.7 trillion) by the end of 2024. This represents a rise of about 13% compared to the previous year, according to data from the Ministry of Finance. Despite this record figure, Japan lost its long-held position as the world’s largest creditor nation.

Read More: India Overtakes Japan to Become 4th Largest Economy.

Germany Surpasses Japan with Strong Trade Surplus

Germany overtook Japan with net external assets amounting to ¥569.7 trillion in 2024. This rise reflects Germany’s substantial current account surplus, which stood at €248.7 billion, boosted by its robust trade performance. By contrast, Japan’s current account surplus was ¥29.4 trillion, roughly equivalent to €180 billion.

Main Reason Why Japan Lost its Position

The euro to yen exchange rate increased by around 5% last year, which amplified the difference between German and Japanese assets when measured in yen. For Japan, a weaker yen contributed to growth in both foreign assets and liabilities; however, asset growth was faster, supported partly by expanded business investments abroad.

Japanese Companies’ Strong Foreign Direct Investment

Japanese firms showed continued interest in foreign direct investment in 2024, particularly targeting the United States and the United Kingdom. According to the finance ministry, sectors such as finance, insurance, and retail attracted significant capital from Japanese investors, underlining Japan’s ongoing commitment to global business expansion.

Conclusion 

Looking ahead, Japan’s outbound investment trends may depend on whether companies maintain or increase their overseas spending, especially in the US. Trade policies, including tariffs introduced by President Donald Trump, may encourage some Japanese firms to shift production or relocate assets to the US as a strategy to reduce trade-related risks.

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