Japan fell to third place among the world’s largest creditor nations in 2025, dropping behind China and Germany despite setting a new record in net foreign assets. After subtracting liabilities owed to foreign investors, Japan’s net external assets reached ¥561.8 trillion ($3.5 trillion).

Despite the significant increase in the value of these assets, Japan remained behind China, which holds assets equivalent to ¥636.3 trillion. Japan had already lost the top global creditor position last year for the first time in 34 years, as Germany’s net foreign assets climbed to ¥675.5 trillion.

Japan’s status as a leading creditor nation for decades had long been one of the reasons the Japanese yen was viewed as a “safe haven” currency. However, that perception is now being questioned, with the yen trading near some of its weakest levels in decades.

“Regardless of rankings, Japan’s net international investment position remains enormous,” said Daisuke Karakama, chief economist at Mizuho Bank. “The question is whether holding such a large amount of foreign assets is still viewed positively in today’s far less peaceful world.”

Karakama noted that large overseas asset holdings were once considered a key reason why the yen acted as a safe haven during periods of market turmoil. “Now, however, simply holding foreign assets may raise questions regarding security and protection,” he added.

He also highlighted the importance of strengthening foreign direct investment into Japan, as Prime Minister Sanae Takaichi pushes domestic investment as a central pillar of her economic agenda.

Japan’s Finance Ministry said Germany and China’s stronger positions reflect their larger current account surpluses, driven mainly by trade. At the same time, the slower growth in Japan’s international investment position reflects the rising value of domestic assets held by foreign investors, especially following the rally in Japanese stocks, which increased the country’s external liabilities.

Karakama expects China, due to its massive economic scale, to build a clear lead in net foreign assets in the future. China has already been competing closely with Germany in this area for years.

According to Japan’s Finance Ministry, the country’s total foreign assets, including liabilities to foreign investors, increased by 8.5% compared to the previous year. The rise was driven primarily by increased business investments in the United States and Switzerland. Significant Japanese investments were directed toward the financial and insurance sectors, as well as transport equipment and non-ferrous metals industries.

Source: moneyreview.gr & Bloomberg