Japan retains status as top creditor nation


Japan kept its position as the world’s largest creditor nation for the 22nd straight year in 2012, government data showed Tuesday, as the dollar’s gains helped inflate the value of overseas assets.

Tokyo was followed by mainland China and Germany in the ranking, which reflects the difference between the value of assets held abroad, including foreign debt and property, minus a nation’s liabilities, such as foreign purchases of its own debt and domestic assets.

In Japan’s case, net overseas assets stood at ¥296.3 trillion at the end of last year, up 11.6 percent from a year earlier, the Finance Ministry said. The rise for the second straight year came mainly because the yen equivalent value of the assets grew under the currency’s depreciation.

The yen has tumbled since Prime Minister Shinzo Abe’s Liberal Democratic Party swept the December election on a pledge to boost the world’s third-largest economy with a plan that includes massive government spending and aggressive central bank monetary easing, which tends to weigh on the unit.

A weaker yen means that assets denominated in another currency, such as the dollar, would become more valuable when calculated in yen terms.

But analysts said there were no guarantee Japan would retain the title going forward as it faces large trade deficits, fueled by surging dollar-denominated energy imports amid the Fukushima nuclear crisis, while carrying a massive public debt.

Abe’s spending measures threaten to inflate a debt pile, which at more than twice the size of the economy is the worst among industrialized nations.

“The exchange-rate effect provides only a temporary boost,” said Tsuyoshi Nakazawa, foreign investment analyst for Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

“Whether Japan can stay as a major creditor nation will depend on its economic competitiveness and energy consumption pattern. . . . Japan is living off its legacy right now,” he told Dow Jones Newswires.

Mainland China’s net overseas assets were ¥150.3 trillion last year, followed by Germany with ¥121.9 trillion, Switzerland at ¥84.7 trillion and Hong Kong with ¥63.4 trillion, Japanese government figures showed.

Separate data released by the Bank of Japan on Tuesday showed China last year remained the biggest foreign holder of Japanese debt, raising its holdings by 14 percent from 2011 to ¥20 trillion.

  • One could hardly regard this as a title given that Japan’s govt is accumulating a great inventory of US bonds. May we ask (i) are these bonds valued at historic cost or market value, (ii) What is return on investment on these investments, because Japan is paying a huge opportunity cost on these ‘savings’. That is a concern for an aging population, and the nation is depopulating besides.