Japan's creditor status is surpassed by Germany, making Germany the new leading lender nation globally.
In a remarkable shift after three decades, Germany has ascended to the position of the world's largest creditor nation, surpassing Japan. As per reports by Bloomberg, citing fresh Japanese statistics, Germany's net foreign assets have grown to approximately 3.481 billion euros at the end of 2024, from around 13% more than Japan's figure of around 3.261 billion euros.
Japan's net foreign assets witnessed an increment of nearly 13% as well, reaching around €3.261 billion in 2024. However, a rising euro exchange rate boosted Germany's position even higher. China remains in third place with a considerable distance.
The growth in Germany's foreign asset position is primarily attributed to its substantial current account surpluses and robust export performance, which are instrumental in the country's economic growth. Despite heavy public debts of over 2.5 billion euros, Germany, statistically, maintains a near-debt-free status due to its strong exports and investments abroad [5].
Notably, Germany has invested more capital abroad than foreign investors have injected into Germany, indicating the resilience of the German economy, but also hinting at a shortcoming in the domestic production sector due to the lack of foreign investors [5].
Recent developments might be transient in light of US President Donald Trump's trade policy. Japanese companies have already stated their intention to extend their investments abroad, particularly in the United States. Other nations are also planning to relocate their production, or transfer assets, to the USA to minimize trade-related risks. Initially, these moves are expected to enhance the US net debtor position [2].
While a current account deficit isn't inherently detrimental, a net debtor position does not necessarily constitute a problem if foreign capital is directed towards future domestic investments. Conversely, a net creditor position does not ensure a more favorable status for the creditor nation. Case in point: the European sovereign debt crisis demonstrated that defaults can occur among states as well [6].
There is concern in countries where Germany holds a significant creditor position, such as the USA, France, and Italy. There is apprehension that capital may not readily be available for investments in these countries if German assets are threatened by payment defaults from other nations.
Relevant Enrichment Data:
The increase in Germany's net foreign asset position is primarily due to its substantial current account surpluses, exceeding €248.7 billion in 2024, significantly larger than Japan's surplus of approximately €180 billion (¥29.4 trillion) [1][4]. This surplus is driven by strong export performance, a constant factor in Germany's economic growth [5].
The appreciation of the euro against other currencies, such as the yen, is another factor contributing to Germany's rise as the world's largest creditor nation. This appreciation inflates the nominal value of German assets when compared to foreign currencies, further enhancing its net foreign asset position [1].
The impact of US trade policy on Germany's net foreign asset position remains indirect. Potential effects include trade frictions and tariffs affecting German exports, changes in US trade policies influencing the attractiveness of US assets for German investors, and shifts in global economic conditions affecting currency values and investment opportunities [2].
In summary, Germany's strong export-driven economy and current account surpluses remain key factors in its increasing net foreign asset position [5]. While US trade policies can indirectly influence Germany's net foreign asset position through trade and investment dynamics, the direct impact is not explicitly detailed in the data obtained [2].
Germany's robust business performance, underpinned by significant current account surpluses and strong export growth, has contributed to itsPosition as the world's largest creditor nation in finance, surpassing Japan. Germany's financial strength is also reflected in its investments abroad, with more capital invested abroad than foreign investors have injected into Germany, indicating the resilience of the German economy.
