Bloomberg News

Japan Logs Second-Biggest Foreign Asset Haul on Record: Economy

May 22, 2012

Japan’s foreign investments and assets grew to the second-highest level on record as companies used the high yen to make acquisitions abroad, a trend that may help them cope with stagnant demand at home.

Investments abroad grew 3.3 percent to 582 trillion yen ($7.3 trillion) in 2011, rising for the third year, the Finance Ministry said in Tokyo today. Currency gains cut the value of existing holdings but encouraged increased investment abroad. Foreign investors increased Japanese assets by an extra 17 trillion, leaving the net creditor position of the country little changed at 253 trillion yen, the world’s largest, the data showed.

Overseas acquisitions, like Kirin Holdings Co. (2503)’s investment in Brazilian beer maker Schincariol Participacoes e Representacoes SA may help Japanese companies’ global competitiveness. The nation’s creditor position supports the sovereign credit rating even as Prime Minister Yoshihiko Noda’s government struggles with the world’s largest public debt.

“Today’s report should provide relief for those who are concerned about Japan’s fiscal collapse in the near future,” said Daiju Aoki, a Tokyo-based economist at UBS AG. “Japan has massive foreign assets but this isn’t as well-known as its debt problems or deflation.”

Foreign holdings of Japanese assets grew 5.5 percent in the year, with investment into Japanese bonds rising more than 27 percent to 91.6 trillion yen as investors viewed the yen as a haven.

Rising Yen

The yen appreciated 4.8 percent against the dollar during 2011, cutting 19.2 trillion yen of value from net overseas assets, the ministry said in the release. The Japanese currency traded at 79.48 as of 3:16 p.m. in Tokyo, an advance of more than 2.5 percent against the dollar in the past month as Europe’s crisis fuels demand.

Japan’s net foreign assets equaled 54 percent of gross domestic product in 2011, the third highest in the world after Hong Kong’s 288 percent and Switzerland’s 157 percent, according to the ministry. China’s ratio was 24 percent.

Japan’s current-account surplus shrank by 44 percent last year as the March earthquake and nuclear crisis drove up energy imports, disrupted supply chains and hampered exports from companies including Toyota Motor Corp. (7203) and Canon Inc. (7751)

The Japanese economy shrank in three of the past four years, and is struggling to recover from last year’s earthquake. The national debt is the highest in the world, with borrowings projected to exceed 1,000 trillion yen ($12.6 trillion) for the first time in this fiscal year, and the OECD forecasting in 2011 that the debt-to-GDP ratio would be more than 220 percent in 2012.

Asia, Europe

The country is also grappling with more than a decade of deflation, with the Bank of Japan (8301) expanding its asset purchase plan twice this year in an attempt to stimulate price rises.

Elsewhere in Asia, Federal Reserve Bank of Atlanta President Dennis Lockhart speaks in Hong Kong to the Institute of Regulation and Risk North Asia on monetary policy at 6:15 p.m. local time today.

In Europe, Norway’s economic growth probably accelerated last quarter, economists predicted before a report today. Gross domestic product excluding oil, gas and shipping output rose 0.9 percent in the period from 0.6 percent in the final three months of last year, the survey of 10 economists showed.

Bank of England Governor Mervyn King will probably have to write a 10th consecutive letter to Chancellor of the Exchequer George Osborne to explain why inflation remained above the government’s upper limit in April, according to a survey of economists.

Analysts' Forecasts

U.K. consumer prices rose an annual 3.1 percent rate after a 3.5 percent gain in March, according to the median forecast of 30 economists surveyed by Bloomberg. That would be the slowest in 19 months. King is obliged to write a quarterly open letter to Osborne while inflation stays above the 3 percent ceiling, explaining the deviation and what he will do about it.

In the U.S., sales of previously owned U.S. homes in April probably rebounded, economists predicted before a report from the National Association of Realtors today in Washington.

Purchases advanced 2.9 percent to a 4.61 million annual rate, a survey of 73 economists showed. Purchases dropped 2.6 percent to a 4.48 million annual rate in March.

To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


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