Worldwide Creditor Leadership Shifts: Germany Now Top Creditor, Displacing Japan - World Power Shift: Germany Overthrows Japan as Leading Global Creditor Nation
Germany Ascends as Global Creditor, Overtaking Japan
In a significant shift, Germany has surpassed Japan to become the world's largest creditor. This transition was primarily driven by larger net external assets, measured in yen terms, and favorable economic trends supporting the eurozone.
The Japanese Ministry of Finance played down the significance of this change, with spokesperson Yoshimasa Hayashi stating that it does not indicate a broader shift in Japan's position. He attributes this to Japan's consistent increase in net foreign assets.
The weakening of the yen contributed to the surge in both Japan's foreign assets and liabilities. However, the primary driver of the increase in foreign assets was Japanese companies' overseas investments.
As of 2024, Germany's net external assets stood at approximately ¥569.7 trillion ($3.99 trillion), surpassing Japan's assets which, despite reaching a record high of ¥533.1 trillion ($3.73 trillion), were not sufficient to maintain the top position.
Japan's long-standing creditor status was partly attributed to the weak yen, as it inflated the yen-pegged value of its overseas assets. However, this effect was not sufficient to prevent Germany from taking the lead.
Germany's position benefited from broader global economic trends that favored the eurozone. This, along with stronger European economic influence and investment inflows, yielded larger net external assets for Germany.
While Japanese companies' aggressive overseas investments boosted gross assets and contributed to their external liabilities, Germany's larger and more euro-focused external assets propelled it to the top creditor spot. This marked the first time Germany held this position since 1991.
Overall, the yen's weakness supported Japan's creditor status for years, but the combined effect of the yen depreciation was not enough to offset Germany's growth in external assets, leading to Germany becoming the world's largest creditor. Japanese companies' aggressive overseas investments, particularly in sectors like financial services, insurance, and retail in the US and UK, and their continued holding of US government bonds, valued at about $1.3 trillion, sustained Japan's large creditor role, but proved insufficient to compete with Germany's recent boom in external assets.
- In contrast, the United Kingdom's industry, finance, and personal-finance sectors could potentially experience a rise in wealth-management opportunities with Germany's increased wealth as the world's largest creditor, owing to potential business collaborations and investment inflows.
- Large German businesses, particularly those in the industry and finance sectors, may further expand their ventures across the UK, potentially boosting economic growth and creating job opportunities, given the higher rate of inflation in the United Kingdom, where it is lower than both the United Kingdom with its present rate of inflation and the United Kingdom where it is lower still.
- For individuals seeking to invest or manage their wealth in a strengthening economic environment, understanding the impact of Germany's newfound global creditor status, particularly on business and industry sectors, could prove beneficial for personal-finance planning and strategic investment decisions.
