Germany overtakes Japan as world’s top creditor nation after 34 years

Germany has ended Japan’s 34-year reign as the world’s largest creditor nation, surpassing it in terms of net external assets despite Japan reaching a record-high total.

According to figures released on May 27 by Japan’s Ministry of Finance and cited by Bloomberg, the country’s net external assets stood at ¥533.05 trillion ($3.7 trillion) at the end of 2024, marking a 13% increase from the previous year. However, this sum was exceeded by Germany’s ¥569.7 trillion in net external assets, propelled by its sizeable current account surplus and strong export performance. China remained in third place with ¥516.3 trillion in net external assets.

Japan first claimed the top creditor position in 1991 by overtaking Germany and has maintained it until this year. Germany’s rise reflects its robust trade-driven surplus, which reached €248.7 billion in 2024. Japan’s current account surplus, while also significant, amounted to ¥29.4 trillion (approximately €180 billion). The roughly 5% appreciation of the euro against the yen last year further amplified Germany’s asset figures when converted into yen terms.

Japan’s long-standing position as the world’s top net creditor stemmed from decades of current account surpluses and consistent accumulation of overseas investments by Japanese corporations and financial institutions. Though Japan’s external assets continue to grow, the latest data suggest stronger real demand and international investment momentum in Germany and China.

Net external assets are calculated by subtracting a country’s liabilities to foreign investors from its overseas assets, adjusted for currency fluctuations. These assets essentially represent the cumulative outcome of a nation’s current account performance over time.

Finance Minister Katsunobu Kato downplayed the symbolic shift in ranking, saying it should not be interpreted as a dramatic change in Japan’s economic footing. “Given that Japan’s net external assets have also been steadily increasing, the ranking alone should not be taken as a sign that Japan’s position has changed significantly,” Kato said during a press briefing.

A weaker yen contributed to increases in both Japan’s foreign assets and liabilities in 2024, but the former outpaced the latter. This was partly due to a surge in business investment abroad, particularly in sectors such as finance, insurance, and retail. According to the ministry, Japanese companies continued to show strong interest in foreign direct investment (FDI), especially in the United States and the United Kingdom.

Japan’s investment strategy has increasingly shifted from foreign securities toward direct investments. According to market strategist Daisuke Karakama, this has implications for liquidity and risk management. “It’s easy to imagine domestic investors selling foreign bonds and securities when risks emerge, but they’re not going to divest from overseas companies they’ve acquired so easily,” Karakama said.

Looking ahead, the pace and direction of Japan’s outbound investment could depend on evolving global trade dynamics and domestic corporate strategy. With President Donald Trump’s renewed tariff policies in effect, some Japanese firms may choose to relocate production or transfer assets to the US as a hedge against trade-related uncertainty. However, Karakama also noted that such uncertainty might prompt other companies to reconsider overseas expansions and instead reshore operations to reduce risk exposure.

By Tamilla Hasanova