Japan Still Beating China on One Score: World’s Top Creditor

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Japan’s foreign investments and assets climbed to a record in 2014, keeping it in front of China and Germany as the world’s top creditor nation.

The reading stretches Japan’s lead as No.1 creditor country to 24 years, with 71 percent more in net assets than China, even after its Asian neighbor surpassed it to become the world’s second-largest economy in 2010.

Japan’s net overseas assets grew 13 percent to 366.9 trillion yen ($3 trillion) in 2014, with the exchange rate helping boost gross holdings by 19 percent to 945.3 trillion yen, according to finance ministry data released in Tokyo on Friday. Liabilities, mostly driven by higher inbound investment, rose 23 percent to 578.4 trillion yen.

“It’s a combination of both stronger investment abroad and an FX effect,” said Izumi Devalier, HSBC’s Hong Kong-based Japan economist.

Japan’s currency has weakened over the past two years as the central bank unleashed unprecedented bond buying in an effort to kick start an economy that has spent more than a decade battling deflation and the impact of a strong currency.

The yen has tumbled about 28 percent against the greenback since the beginning of 2013. It was trading at 120.75 at 4:41 p.m. in Tokyo.

U.S. Debt

The U.S. was the most indebted nation in the Group of Seven nations, according to the ministry’s data, with 834.3 trillion yen in net liabilities at the end of 2014. This is partly due to the desire of other nations to hold U.S. debt, with Japan and China the two biggest foreign owners of treasuries.

China’s net overseas assets were the equivalent of 214.3 trillion yen last year, while Germany’s totaled 154.7 trillion yen, the Japanese Finance Ministry data showed.

While the yen has recently held its ground against the dollar as traders push back bets of a U.S. interest rate increase, the Japanese currency could yet weaken further, according to Daisaku Ueno, chief currency strategist at MUFJ Morgan Stanley in Tokyo.

The Bank of Japan refrained from unleashing fresh stimulus at its meeting Friday, though tepid economic growth and still subdued price rises mean new measures may be possible later in the year.

“The economy is nowhere near full throttle, prices pressures will remain subdued so as a result the Bank of Japan will be pressured to ease one more time,” Devalier said on Bloomberg Television.

(A currency conversion was corrected in an earlier version of this story.)

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