Japan is losing leadership

GBP/JPY

Key zone: 213.50- 214.50

Buy: 215.00 (on strong positive fundamentals); target 216.50-218.00; StopLoss 214.50

Sell: 213.00 (on a pullback after retesting 214.50) ; target 211.00-210.50; StopLoss 213.50

Japan, which for decades had been considered a symbol of financial stability and the world’s largest creditor, has lost its leadership position. Despite record growth in foreign assets, the country yielded first place to Germany, raising further questions about the long-term sustainability of the Japanese economy and the prospects of the yen.

At the end of 2025, Germany retained its status as the world’s largest creditor with net foreign assets totaling $4.2 trillion (¥675.5 trillion). Japan, despite a historical maximum in its own net foreign assets — ¥561.8 trillion ($3.5 trillion) — failed to regain leadership. The key reason was the critical weakness of the yen.

However, the currency factor is only part of the problem. A significant role is also played by changes in the structure of the global economy. Germany maintains its position as one of the largest exporters of industrial products, while China continues to actively increase overseas investments and foreign exchange reserves. Japan, meanwhile, faces internal constraints: weak domestic demand, a demographic crisis, and a record level of government debt.

Reminder:

A creditor country is a state whose volume of foreign assets exceeds its obligations to the outside world. Essentially, this reflects the scale of accumulated financial influence. The higher the volume of net foreign assets, the stronger the country’s position in global capital markets, the debt system, and international currency flows.

Fresh statistics show that Japan’s foreign assets increased by 8.5% over the year, reaching approximately ¥1,806 trillion. Growth was driven by investments in overseas businesses, primarily in the United States and Switzerland. Significant amounts of capital were directed into the financial sector, insurance, transport engineering, and non-ferrous metallurgy.

At the same time, Japan’s liabilities increased by 10.5%, reaching ¥1,244 trillion. Meanwhile, the stock market demonstrated strong performance: the Nikkei 225 index rose by 26% in 2025, surpassing the 50,000-point mark.

For a long time, it was precisely the status of the largest creditor that supported the yen’s reputation as a safe-haven asset. Japanese banks, pension funds, and insurance companies had for decades remained the largest buyers of American and European bonds, while the scale of overseas investments strengthened confidence in JPY during periods of global instability.

For the currency market, these changes carry strategic significance.

• The loss of leadership increases long-term structural pressure on the yen.
• The decline in Japan’s international financial influence is perceived by investors as an additional factor weakening JPY.

For traders, this means continued high sensitivity of the USD/JPY pair to capital flows and the actions of the Bank of Japan. If rising domestic rates push Japanese investors to reduce investments in foreign bonds, this could become a driver for yen strengthening while simultaneously increasing pressure on the U.S. debt market.

For the Japanese stock market, the signal remains mixed.

• A weak yen continues to support exporters — primarily Toyota, Sony, Mitsubishi, and other international corporations.
• At the same time, the decline in the country’s global financial weight strengthens doubts regarding the long-term sustainability of Japan’s growth model.

And what is the result?

Japan remains one of the largest creditors, which means Japanese investors continue to control enormous volumes of foreign capital. During periods of market stress, this may provoke the repatriation of funds back to Japan, traditionally supporting the yen as a safe-haven asset.

• The long-term trend for USD/JPY remains sensitive to BOJ policy and U.S. Treasury yield dynamics;
• A weak yen is becoming a key factor in the decline of Japan’s international financial influence.
• Germany’s strengthening as the world’s largest creditor increases the importance of the euro in international capital flows;
• China continues to strengthen its position in the global financial system, gradually approaching the status of a dominant creditor.

The change of leaders among the world’s creditors is not just statistics. The redistribution of the role of the largest creditors is capable of changing the trajectory of investment flows, bond markets, and global capital movement.

So we act wisely and avoid unnecessary risks.

Profits to y’all!