World power shifts as Germany assumes the position of top global creditor, previously held by Japan.
Germany surpasses Japan as world's largest creditor after 34 years
Germany has assumed the title of the world's largest creditor nation, surpassing Japan for the first time since 1991, according to recent financial data. This shift in global financial leadership comes amidst a record-high level of net external assets for Japan, valued at approximately ¥533.1 trillion ($3.73 trillion) at the end of 2024. In contrast, Germany recorded even larger net external assets, totaling about ¥569.7 trillion ($3.99 trillion) during the same period.
Japanese government officials have sought to downplay the significance of this change, with Yoshimasa Hayashi, spokesperson for the Finance Ministry, stating that the shift in rankings does not necessarily signify a major shift in Japan's position given the consistent increase in Japan's net foreign assets.
The boost in net foreign assets for both Japan and Germany may be partly attributed to currency movements. The Japanese yen weakened significantly against major currencies, particularly the US dollar and the euro, leading to an increase in the yen value of Japan's overseas assets. However, Germany's assets are valued in stronger currencies, primarily the euro, which has contributed to Germany's even more significant measured external assets.
Japanese companies also continued to expand overseas, particularly in sectors such as financial services, insurance, and retail. In addition, Japan remained the largest holder of US government bonds, valued at around $1.3 trillion. However, these strategic expansions did not prevent Japan from losing its top position due to the impact of currency effects and Germany's own robust external asset growth.
Germany's ascendance reflects broader global economic trends favoring the eurozone. The country benefits not only from large export surpluses but also from substantial investments abroad and a strong international financial position. The euro's relative strength compared to the yen further solidified Germany's lead in net external assets.
On the other hand, Japan faces rising liabilities, which offsets its substantial gross external assets. This strategic balancing means that net external assets, what remains after liabilities are subtracted, are affected by both asset growth and debt management.
In summary, Germany surpassed Japan primarily due to favorable currency exchange rates, robust growth in external assets, and sustained export surpluses, while Japan's massive overseas investments were offset by a weaker yen and rising liabilities. The shift in financial leadership marks a significant milestone in the global economic landscape.
Source: ntv.de, AFP
The Commission, in the preparation of the report, might have analyzed the factors contributing to Germany's surge in net external assets, such as the finance sector's role in global business expansions and the euro's strength against the yen.
Germany, with its substantial net external assets in euros, could potentially have an impact on the global business environment, as the country continues to explore investment opportunities and maintain its strong international financial position.
