Japan's International Investment Position at Year-End 2001
August 30, 2002
Bank of Japan
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The international investment position (IIP) is the "stock" statistics 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 2001, Japan's assets exceeded liabilities, which resulted in a net asset position.
From the figures for 2001, Japan's IIP statistics exclude securities lending transactions. This change was made in accordance with developments in debates over the statistical treatment of such transactions at the International Monetary Fund (IMF). For details, see Box 1 on pages 153-55.
Japan's IIP recorded a net asset position of 179.3 trillion yen at year-end 2001, increasing by 46.2 trillion yen (up 34.7 percent) from the previous year. This was the largest net asset position, exceeding the previous peak of 133.3 trillion yen marked at year-end 1998.
The main factors behind the 46.2 trillion yen growth in the net asset position were (1) an increase of 18.7 trillion yen in outward investment (assets) against the backdrop of a continued surplus in the current account in 2001; (2) an increase of 27.8 trillion yen in the yen-denominated value of net foreign-currency assets due to the depreciation of the yen; and (3) a decrease of 23.1 trillion yen in the liabilities, mainly in the value of foreign holdings of Japanese equities, due to a fall in Japanese stock prices.
The major features of each item were as follows.
(1) Direct investment (32.9 trillion yen, up 6.7 trillion yen [25.6 percent] year on year): The amount outstanding of "outward direct investment" increased by 7.6 trillion yen (up 23.6 percent) from the previous year due to (a) Japanese firms' acquisition of, capital participation in, and increase of capital in firms overseas reflecting industrial reorganization and intensified competition on a global scale; and (b) an increase in value, caused by the depreciation of the yen. The amount outstanding of "inward direct investment" increased by 0.9 trillion yen (up 14.7 percent) reflecting active investment in financial services and insurance as well as telecommunications companies by foreign companies, as an increasing number of Japanese firms began to accept participation of foreign capital.
(2) Portfolio investment (82.2 trillion yen, up 33.7 trillion yen [69.5 percent] year on year): "Japan's holdings of foreign bonds and notes" increased by 20.4 trillion yen (up 18.2 percent) from the previous year, owing to aggressive purchasing of U.S. and European bonds by life insurance companies and banks, and the depreciation of the yen. By contrast, "foreign holdings of Japanese equities" dropped by 13.7 trillion yen (down 21.6 percent) due to the fall in Japanese stock prices.
(3) Other investment (11.4 trillion yen, down 5.4 trillion yen [32.3 percent] year on year): The amount outstanding of "assets" decreased by 0.2 trillion yen, almost unchanged from the previous year. On the other hand, the amount outstanding of "liabilities" increased by 5.3 trillion yen (up 5.2 percent) as a result of an increase in loans payable (borrowings) and deposits received from banks' overseas offices through their interoffice accounts.
Comparison with other major countries suggests that Japan has been the country with the largest net asset position, for the eleventh consecutive year.