Japan's creditor position in the global economy is usurped by Germany. - World Finance Shift: Japan no longer tops as world's leading creditor, position now held by Germany.
Germany Ascends as World's Largest Creditor, surpassing Japan after 34 years
- Berlin and Tokyo*
Germany has assumed the mantle of the world's largest creditor from Japan in 2024, marking a significant shift in global financial standing. The German government's robust trade performance propelled a record current account surplus of around €248.7 billion (approximately USD 283 billion), outstripping Japan's €180 billion (approximately ¥29.4 trillion).
Key Factors Contributing to Germany's Rise
Several factors played a decisive role in Germany's ascent to the top spot. The surge in its significant current account surplus bolstered its net external assets, primarily from exports and international trade. Besides, the euro's appreciation against the yen, approximately 5% in 2024, magnified the value of Germany's overseas holdings when measured in yen or dollar terms.
Examining the Impact of the Weaker Yen
On the other hand, the yen's depreciation against major currencies, including the euro and dollar, raised the value of both Japan's foreign assets and liabilities when measured in yen. However, the growth in Japan's external assets was fueled primarily by increased overseas investments by Japanese companies, particularly in the US and UK.
Implications for the Japanese Government
Despite the weaker yen contributing to a higher yen-denominated value of Japan's foreign assets, the shift in ranking merely highlighted a change in position but did not signify a substantial transformation in Japan's status. The Japanese Ministry of Finance (BMF) conceded that the ranking change alone did not suggest a significant shift in Japan's position.
In conclusion, Germany's substantial current account surplus and a stronger euro served as the primary catalyst for its ascent, while Japan's weaker yen amplified the yen-denominated value of its foreign assets, but the yen's weakness was overshadowed by Germany's assets' enhanced value in a stronger currency.
- In the global context of wealth management, the stronger euro in comparison to the yen could make investment opportunities in the United Kingdom, with its lower inflation rate, more attractive for German businesses and individuals seeking to diversify their personal-finance portfolios.
- The rising finance industry in the United Kingdom, particularly in areas like London's City district, may observe an increase in business as Germany, now the world's largest creditor, seeks opportunities for wealth management and investing beyond its own borders.
- Simultaneously, the Japanese government, focusing on reversing their nation's decline as a creditor, could concentrate on relevant industries such as finance, industry, and business to stimulate economic growth, leading to increased personal-finance assets and strengthening Japan's position in the global financial landscape.
