Germany Topples Japan as World’s Top Creditor—Guess Who’s Holding the Bag Now?

The global financial hierarchy just got a shakeup—Germany’s now calling the shots as the world’s biggest creditor, leaving Japan in the dust. No hard numbers? No problem. The message is clear: the Bundesbank’s balance sheet is looking juicier than Tokyo’s.

Funny how the ’land of rising sun’ keeps setting on its own economic dominance. Maybe they’ll pivot to crypto next—oh wait, they already tried that.

Weak yen fuels Japan’s asset growth, but not enough to lead

The devaluation of the yen was a big factor behind the growth of Japan’s foreign assets. The value of assets in the currencies appreciated when they were converted back into yen as the yen weakened against the euro and dollar.

The yen fell roughly 11.7% against the U.S. dollar in 2024 and 5% against the euro. This caused euro-denominated German assets to look much larger in yen terms.

By the end of 2024, Japan had gross external assets of ¥1,659 trillion ($11.61 trillion), or ¥169 trillion ($1.18 trillion) more than the preceding year. And yet its liabilities also surged, rising by ¥109 trillion ($0.76 trillion) to ¥1,126 trillion ($7.88 trillion).

Although Japan posted strong figures, Germany’s surge in external surplus combined with favorable currency movements ultimately gave it the edge.

Trade pressures push Japan to invest overseas

Japanese businesses maintained their momentum of aggressive overseas investments in 2024, especially in finance, insurance, and retail. The United States and the United Kingdom remained key targets for these investments.

Mergers and acquisitions overseas by Japan saw particularly strong growth. Such investments helped boost overall foreign assets but may not result in short-term gains.

In the future, Japan’s status as a global creditor will hinge on how its companies fare in the global economy, particularly as rising geopolitical tensions and evolving tariff rules loom.

President Donald Trump’s resurgence and trade policies may also influence where and how Japanese companies invest more. Some may MOVE manufacturing or assets to the United States as an insurance policy against future tariffs or other trade blocks.

Japan is still one of the world’s most fiscally solid countries. However, whether the country can sustain its economic success is uncertain, as longer-term challenges, such as the impact of an aging population, stubbornly low wages, and persistent deflation, threaten to hobble its economic growth over the long term.

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