Japan dropped to third place in the global creditor rankings in 2025, overtaken by China despite posting a record high in net external assets, Japan’s Finance Ministry announced on Tuesday, May 26. Net external assets held by the Japanese government, businesses, and individuals rose 4.4% from a year earlier to 561.75 trillion yen, equivalent to $3.53 trillion. The figure was not enough to hold off China, whose external assets climbed at a faster rate.
Japan’s net external assets rose to an all-time high at the end of 2025, but the total was surpassed by China, whose net external assets climbed at a faster pace to 636.3 trillion yen. Germany retained the top position with 675.5 trillion yen in net external assets, according to ministry data cited by Reuters.
The growth marked the eighth straight year of expansion, driven by Japanese companies’ robust overseas investment, mergers and acquisitions, as well as valuation gains on foreign securities held by residents. Yet that momentum was not sufficient to close the gap with China, whose assets grew more rapidly over the same period.
Japan’s external liabilities also expanded sharply, limiting the country’s net gains. The strong performance of the domestic equity market translated into a 62.2 trillion yen upward revaluation of Japanese securities held by non-resident investors, swelling the liability side of the ledger. The result was a rising gross overseas footprint constrained by foreign appetite for Japanese assets.
Both Germany and China saw their net external assets boosted by annual trade surpluses, while Japan saw the growth of its net external assets contained partly because its external liabilities also swelled significantly, according to Reuters. Analysts also noted that a relatively stable yuan and euro supported China’s and Germany’s positions, while the yen experienced fluctuations over the past year.
Yang Delong, chief economist at Shenzhen-based First Seafront Fund, said China’s advance was structural, not cyclical. “China’s overtaking of Japan to become the world’s second-largest net creditor nation is not due to short-term market volatility, but rather the long-term structural outcome of a solid domestic economic foundation, continuous optimization of cross-border asset allocation, and steady advancement of financial opening-up,” Yang told the Global Times.
Yang also said the data showed that China’s external asset structure continued to improve in 2025, with overseas physical asset deployment and diversified financial asset allocation advancing in tandem, alongside steady enhancement in asset quality.
China’s net external assets stood at $4.0713 trillion at the end of 2025, per data from the State Administration of Foreign Exchange. By the same measure, Japan’s assets of $3.53 trillion placed it firmly behind both rivals in the global table.
Regional and Global Impact
The shift carries implications beyond a statistical re-ranking. Japan’s declining relative creditor standing matters for the yen, long treated by markets as a safe-haven currency partly because of the country’s large net overseas asset position. A growing stock of foreign liabilities, driven by non-resident demand for Japanese equities, means Japan’s net creditor position is being squeezed from both sides: assets rising, but liabilities rising faster in valuation terms.
For China, the data marks a concrete advance in global financial standing at a time when Beijing has been actively expanding its international investment footprint. Analysts pointed out that China’s steady rise in net external assets is the long-term realization of the country’s comprehensive economic strength, financial stability, and diversified overseas investment, and is not the result of short-term data fluctuations.
Germany’s position at the top of the table reflects the sustained strength of its current account surplus. Germany’s ascent reflects its substantial current account surplus, which reached €248.7 billion in 2024 thanks largely to a strong trade performance. Both Germany and China benefit from a structural trade surplus dynamic that Japan, with a more mixed current account profile, has not been able to replicate.
Background
Net external assets measure the value of overseas holdings by a country’s residents and institutions minus domestic assets held by foreigners, adjusted for currency fluctuations. The figure broadly reflects cumulative current account balances over time and serves as a key indicator of a nation’s external financial strength. Japan began its streak at the top of the global creditor table by overtaking Germany in 1991. It held that position for 34 consecutive years before losing the top spot to Germany in 2024, when Germany posted net external assets of 569.7 trillion yen against Japan’s 533.05 trillion yen. China ranked third that year with 516.3 trillion yen. The reversal in 2025 — with China jumping from third to second and Japan falling one further place — represents a second consecutive year of decline in Japan’s relative standing.
What Happens Next
Japan’s Finance Ministry has not announced any policy response to the rankings shift. The trajectory of Japan’s net creditor position will depend in part on continued overseas investment by Japanese corporations, the performance of the yen, and the degree to which foreign investors continue to add exposure to Japanese equities — all of which affect both the asset and liability sides of the ledger. Reuters reported that the ministry also released revised current account balance data alongside the net external assets figures on Tuesday. Analysts cited by the Global Times said China’s external asset-liability structure is expected to continue improving, with foreign capital allocation to China maintaining a steady pace. No date has been set for the next comparable data release.
