Japan's International Investment Position at Year-End 2000
August 31, 2001
Bank of Japan
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The international investment position (IIP) is the "stock" data of financial items (capital and financial account plus reserve assets) in the balance of payments ("flow" statistics). In the IIP, assets comprise the balance of external financial assets of residents in Japan (including the offices of foreign companies and financial institutions in Japan), while liabilities comprise the balance of external liabilities of residents in Japan (assets held in Japan by nonresidents). In order to present figures in yen, the foreign-currency amounts are converted at the exchange rate in effect at the year-end. In principle, assets and liabilities are measured at current market prices. The difference between assets and liabilities is the net IIP. In Japan in 2000, assets exceeded liabilities, which resulted in a net asset position.
Japan's IIP recorded a net asset position of 133.0 trillion yen at year-end 2000, increasing 48.3 trillion yen from the previous year and marking the second highest level historically, the highest being 133.3 trillion yen at year-end 1998.
The main factors behind the 48.3 trillion yen growth in net asset position were (1) a surplus of 13.1 trillion yen in the current account, (2) an increase of 13.4 trillion yen in the yen-denominated value of net foreign-currency assets due to the depreciation of the yen, and (3) a decrease of 20.9 trillion yen in the value of foreign holdings of Japanese equities due to a drop in Japanese stock prices.
The major features of each item were as follows.
(1) Direct investment: The amount outstanding of "outward direct investment" increased by 6.6 trillion yen, up 25.8 percent from the previous year due to (a) acquisition of and capital participation in firms overseas reflecting industrial reorganization and intensified competition on a global scale, (b) an increase of capital at overseas subsidiaries, and (c) an increase in the value caused by the depreciation of the yen. The amount outstanding of "inward direct investment" increased by 1.1 trillion yen, up 22.7 percent, reflecting active investment in financial services and insurance and in transportation equipment companies by foreign companies, as global industrial reorganization progressed and an increasing number of Japanese firms began to accept participation of foreign capital.
(2) Portfolio investment: "Japan's holdings of foreign bonds and notes" increased by 13.3 trillion yen, up 14.5 percent, owing to aggressive purchasing of U.S. and European bonds by banks. "foreign holdings of Japanese bonds" increased by 2.9 trillion yen, up 10.5 percent, mainly due to active purchasing by European investors. By contrast, "foreign holdings of Japanese equities" dropped by 21.0 trillion yen, down 24.7 percent, due to a drop in Japanese stock prices that reflected an unclear outlook for Japan's economic recovery.
(3) Other investment: The amount outstanding of "loans (assets)" increased by 3.5 trillion yen, up 2.8 percent, owing to an increase in deposits overseas by banks. The amount outstanding of "loans payable (liabilities)" increased by 7.6 trillion yen, up 7.7 percent, mainly due to a rise in borrowings from banks' overseas offices through interoffice accounts.
Comparison with other major countries suggests that Japan has been the country with the largest net asset position for ten consecutive years.