For the first time in 34 years, Japan has lost its status as the world’s largest creditor nation. According to the latest data released by Japan’s Ministry of Finance on May 27, Japan’s net external assets reached 533.05 trillion yen by the end of 2024, a 12.9% increase year-on-year and a record high for the sixth consecutive year. However, it was overtaken by Germany, whose net external assets totaled 569.7 trillion yen. This shift signals a profound restructuring of the global economic landscape and highlights the challenges Japan faces in areas such as exchange rate volatility, trade competitiveness, and industrial restructuring.
The “Double-Edged Sword” Effect of Yen Depreciation Becomes Apparent
While the weak yen significantly increased the yen-denominated value of Japan’s overseas assets, it also underscored the relative weakness of the Japanese economy. Data shows that in 2024, the U.S. dollar and euro appreciated against the yen by 11.7% and 5%, respectively. This boosted Japan’s total external assets to 1,659 trillion yen, with external liabilities at 1,126 trillion yen, resulting in a 12.9% increase in net assets. However, while the yen’s depreciation enhanced the value of overseas assets, it also raised borrowing costs for domestic companies and weakened overall economic competitiveness.
Germany’s Trade Advantage: The Key to Victory
Germany’s rise is closely tied to its strong trade performance. In 2024, Germany recorded a current account surplus of 248.7 billion euros, largely driven by its export strength in high-end manufacturing sectors. In contrast, Japan’s trade surplus in 2024 was only 29.4 trillion yen (approximately 180 billion euros), highlighting a growing gap in trade competitiveness. Germany’s sustained expansion in global markets for automobiles, machinery, and other high-end manufacturing products has helped it amass vast overseas assets. Meanwhile, Japan has lagged in industrial upgrading and suffers from a relatively narrow trade structure, causing it to gradually lose its leading position in the global creditor landscape.
Japan Faces Mounting Economic Pressure
In addition to intensifying external competition, Japan’s domestic economy is also under strain. Preliminary statistics released on May 16 show that Japan’s real GDP declined by 0.2% quarter-on-quarter in Q1 2025, translating to a 0.7% annualized contraction—marking the first negative growth in a year. While Japanese companies have been active in overseas mergers and acquisitions, particularly in the U.S. and U.K. financial, insurance, and retail sectors, the risk of domestic industrial hollowing-out is rising, further undermining Japan’s foundation as a creditor nation.
Future Challenges and the Path Forward
Analysts suggest that for Japan to reclaim its position as the world’s largest creditor nation, it must take a multi-pronged approach: First, implement structural reforms to stimulate domestic economic growth and strengthen internal demand. Second, optimize industrial structure by investing more in high-end manufacturing and digital economy sectors. Third, promote trade diversification to reduce reliance on single markets. In addition, exchange rate stabilization and debt control will be crucial elements of Japan’s economic policy.
Amid the accelerating reconfiguration of the global economic order, Japan’s loss of its top creditor status is not only a wake-up call regarding its economic realities but also a clear indicator of the direction needed for future reforms.
