A weak yen – it lost around 11% against the dollar last year – has boosted the value of foreign assets held by the Japanese government, businesses and individuals.
And this monetary factor, together with an increase in foreign direct investment, has helped Japan post a record annual increase of 5.6 trillion yen in the value of net foreign assets.
“Yen weakness and U.S. stock market gains have contributed to the accumulation of net foreign assets,” said Daisaku Ueno, chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities, adding that the data had no implications. on short-term currency movements.
The data could allay some concerns over the currency’s recent sharp plunge to its lowest level in two decades, above 131 yen to the dollar, which has raised concerns about Japan’s purchasing power.
Japan’s net foreign assets were 1.3 times higher than those held by Germany, the world’s second largest creditor, followed by Hong Kong and China, at the end of 2021.
Gross foreign assets amounted to 1,249.9 trillion yen and foreign debt to 838.7 trillion yen, bringing Japan’s net foreign assets to 411.2 trillion yen.
Separate data confirmed Japan’s current account surplus of 15.5 trillion yen in 2021, down 1.2% from the previous year, with primary income gains of 20.5 trillion yen in 2021. yen adding a trade surplus of 1.7 trillion yen.
The data underscores the view that Japan’s large revenue gains from its overseas investments are more than offsetting the weakness in the trade balance, helping to maintain the yen’s status as a safe-haven currency, for the time being.
“Medium to long term, however, the yen will not be seen as a safe-haven currency given Japan’s trade deficit and shrinking population,” Ueno said.
($1 = 126.8400 yen)