Japan Loses Top Creditor Status! Will the Central Bank Raise Rates Again This Year?

TradingKey - Data released on Tuesday by Japan's Ministry of Finance shows that while Japan’s overseas asset holdings hit a record high, the country unexpectedly lost its position as the world’s largest creditor nation for the first time in 34 years.

The data showed that as of the end of 2024, Japan's net foreign assets—calculated as total overseas assets minus foreign liabilities—reached JPY 533.05 trillion (approximately USD 3.7 trillion), representing an increase of about 13% compared to the previous year.

Despite the rise in Japan’s total foreign assets to a record high, Germany’s net foreign assets at the end of 2024 (converted into yen) reached JPY 569.7 trillion, surpassing Japan. China followed in third place with net foreign assets totaling JPY 516.3 trillion.

【Balance of Payments in 2024 ,  Source: Ministry of Finance, Japan】

Main Reasons Behind Japan Losing Its Top Creditor Status:

The weakening yen played a key role. The euro appreciated approximately 5% against the yen over the past year, boosting Germany's net foreign assets when measured in yen terms compared to Japan’s growth.

Germany’s current account surplus reached EUR 248.7 billion, supported by consistently strong trade performance. In contrast, data from Japan’s Ministry of Finance showed Japan’s current account surplus stood at JPY 29.4 trillion (approximately EUR 180 billion) in 2024, significantly lower than Germany’s figure.

Net foreign assets refer to the value of overseas assets held by a country minus assets held by foreigners within that country. A higher net value indicates a stronger creditor position. The fundamental driver behind long-term growth in net foreign assets is sustained current account surpluses.

Meanwhile, on May 27, Bank of Japan Governor Kazuo Ueda stated at an international conference in Tokyo that if subsequent economic data further strengthened confidence in the outlook, the BOJ would adjust the degree of monetary easing as appropriate to ensure the achievement of sustainable inflation targets.

Expectations of BOJ rate hikes could support yen appreciation, potentially helping Japan regain its position as the world's largest creditor nation.