Japan has ceded its position as the world's second-largest creditor nation to China. Creditor status is measured by net external assets, an indicator that gauges a country's external financial soundness and global economic power.
Japan's Ministry of Finance announced Wednesday that the country's net external assets reached a record high of 561.8 trillion yen (approximately 5,332.8 trillion won) at the end of last year, according to Reuters. The figure marked the eighth consecutive year of growth, driven by active overseas investment and mergers and acquisitions by Japanese companies, along with valuation gains on foreign securities held by domestic investors.
Net external assets are calculated by subtracting the value of domestic assets held by foreigners from the value of overseas assets held by a country's residents, with adjustments for exchange rate fluctuations. Overseas assets held by residents include foreign company stocks and bonds, real estate, and foreign exchange reserves owned by domestic investors. Domestic assets held by foreigners include stocks, government bonds, real estate, and direct investments. A positive net external asset position makes a country a "creditor" in the global economy, while a negative position makes it a "debtor."
Although Japan's net external assets hit a record high, its international ranking declined. China's net external assets grew faster than Japan's, reaching 636.3 trillion yen at the end of last year.
Japan, which had been the world's largest creditor nation, lost its top position to Germany in 2024 for the first time in 34 years. Just one year later, it slipped another rung. Germany retained its position as the world's largest creditor nation with net external assets of 675.5 trillion yen at the end of last year.
The Japanese Ministry of Finance explained that the increases in net external assets in China and Germany mainly reflect large current account surpluses driven by trade surpluses. In contrast, Japan's stock market boom pushed up the value of domestic equities, increasing the size of domestic assets (external liabilities) held by foreign investors and slowing the growth of its net external assets. The Nikkei 225, Japan's benchmark stock index, rose 26% last year. The Nikkei has continued its upward trend, briefly surpassing 65,000 on Tuesday to set a new intraday record.
Meanwhile, the United States is the world's largest debtor nation, and its debt is growing larger. According to the U.S. Bureau of Economic Analysis, America's net international investment position stood at -$27.54 trillion at the end of 2025, worsening from -$26.54 trillion at the end of 2024. Converted to yen at the end-2025 exchange rate of approximately 157 yen per dollar, $27.54 trillion equates to about 4,323 trillion yen — roughly 7.7 times the size of Japan's creditor position and exceeding the combined creditor positions of China and Germany. However, with the dollar serving as the global reserve currency, this structure is expected to persist.
