Japan's International Investment Position at Year-End 2006*
* This is an English translation of the Japanese original released on May 31, 2007.
August 30, 2007
International Department
Bank of Japan
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I. Summary
Japan's international investment position (IIP) recorded a net asset position, the outstanding amount of external financial assets of residents in Japan minus the outstanding amount of external financial liabilities of residents in Japan, of 215.1 trillion yen at year-end 2006. This represents an increase of 34.4 trillion yen or 19.0 percent from the previous year-end, and marks a new record high since year-end 2004.
Comparison with other major countries indicates that Japan has been the country with the largest net asset position for the 16th consecutive year since year-end 1991.
The major trends for each component were as follows.
(1) Direct investment (assets: 53.5 trillion yen; liabilities: 12.8 trillion yen)
Direct investment assets increased for the third consecutive year, rising by 7.9 trillion yen or 17.3 percent from year-end 2005. This was primarily due to (a) an increase in direct investments in the European Union (EU) and Asia by Japanese companies with the aim of overseas business expansion, and (b) an increase in the yen-denominated value of assets reflecting the depreciation of the yen. Direct investment liabilities increased for the eighth consecutive year, rising by 0.9 trillion yen or 7.6 percent from year-end 2005.
(2) Portfolio investment (assets: 278.8 trillion yen; liabilities: 209.7 trillion yen)
Portfolio investment assets increased by 29.3 trillion yen or 11.7 percent from year-end 2005. This substantial increase was due to (a) active purchases of foreign debt and equity securities (including real estate investment trusts [REITs]) by investment trusts reflecting the inflow of funds from individual investors, and (b) an increase in the value of assets due to the depreciation of the yen. Portfolio investment liabilities also increased, by 27.7 trillion yen or 15.2 percent. This was mainly due to (a) continued purchases of Japanese equity securities by nonresident investors, supported by a favorable outlook for the business performance of Japanese companies, and (b) an increase in the value of equity securities reflecting the rise in Japanese stock prices.
(3) Financial derivatives (assets: 2.7 trillion yen; liabilities: 3.6 trillion yen)
Both financial derivative assets and liabilities decreased from year-end 2005.
(4) Other investment (assets: 116.7 trillion yen; liabilities: 116.9 trillion yen)
Other investment assets increased by 8.2 trillion yen or 7.5 percent from year-end 2005, primarily due to the outflow of yen funds reflecting demand from overseas. Other investment liabilities decreased for the first time in seven years, by 10.8 trillion yen or 8.4 percent from year-end 2005. The decrease was attributable to banks' repayment of funds borrowed from their overseas branches for investment in foreign bonds and notes.
(5) Reserve assets (assets: 106.4 trillion yen)
Reserve assets rose for the eighth consecutive year, increasing by 7.0 trillion yen or 7.0 percent from year-end 2005. This was due to an addition of interest accruing from bonds and notes to the reserve assets and an increase in the value reflecting the depreciation of the yen.
Japan's international investment position (IIP) statistics were made public in Japanese on May 25, 2007, by the Ministry of Finance and the Bank of Japan as the Report on External Assets and Liabilities as of Year-End 2006 . The regional breakdown is available on the Bank of Japan's web site.
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