When it comes to Japan, what is the first thing that comes to everyone's mind?

Some people with economic knowledge might say that Japan's GDP has been stagnant for over 30 years.

In the mid-1990s, Japan's GDP had already reached around 5 trillion US dollars.

Not only has it not increased since then, but it has actually fallen to around 4 trillion US dollars. In 2023, Japan's GDP was 4.2129 trillion US dollars, overtaken by Germany and dropped to the fourth place globally.

Additionally, in 2023, Japan's per capita GDP was only around 34,000 US dollars, less than half of that of the United States, and it is gradually falling behind the leading developed countries.

This is not stagnation; it is clearly a regression!

Therefore, many netizens say that Japan is not doing well, and if this trend continues, it might be kicked out of the ranks of developed countries one day.

However, those who are familiar with Japan know that, in fact, their economy is "rising from the dead."Although Japan's domestic economy is in disarray, they are thriving overseas. It is widely known that Japan has been building another Japan abroad. Since the 1980s, with the continuous accumulation of domestic wealth, Japan has been on a buying spree overseas, even acquiring many significant American assets. Especially after entering the 1990s, as Japan's economy stagnated, a large number of Japanese companies began to invest abroad, seeking global opportunities. After decades of struggle, Japan's overseas assets have grown increasingly. A few days ago, the Japanese Ministry of Finance released data on foreign investment for the fiscal year 2023. According to the data, as of the end of 2023, Japan's net external assets amounted to 471.3061 trillion yen (approximately $3.36 trillion at the end-of-2023 yen-to-US dollar exchange rate), an increase of 12.2% from the end of 2022, making Japan the world's largest net creditor nation for the 33rd consecutive year.

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Let me explain what net external assets are. In the International Investment Position (IIP) table, the capital invested by a country (including government, businesses, and individuals) abroad is referred to as "external assets," while the investments made by other countries within one's own country are called "external liabilities."In simple terms, external net assets refer to the net amount resulting from a country's total foreign investments minus its external liabilities.

For instance, by the end of 2023, Japan's balance of external assets was 1488.3425 trillion yen, marking an increase of 11.1% year-on-year; the balance of external liabilities was 1017.0364 trillion yen. Subtracting the latter from the former, Japan's external net assets amounted to 471.3061 trillion yen.

Referring to Japan's GDP in 2023, its external net assets accounted for nearly 80% of the domestic GDP.

Under normal circumstances, the net assets generated by a country's foreign investments are not included in the country's GDP. Therefore, Japan's actual economy is much larger than the wealth produced domestically.

If we consider the economic activities engaged in by the Japanese government, businesses, and individuals globally (including within Japan) as the statistical scope, Japan's global GDP should be around 7.5 trillion US dollars, and it should have been around 8 trillion US dollars before the yen depreciated.

Why does Japan have so much overseas wealth? A significant reason is actually being forced into it.

Japan is a country with limited land and scarce domestic resources, heavily reliant on imports for many things.

Additionally, during the rapid economic development of Japan in the 1980s and 1990s, the cost of domestic production factors soared quickly, causing some of Japan's export products to gradually lose their competitive edge.

Furthermore, as Japan's economy grew rapidly, their domestic GDP approached that of the United States, which made the US uneasy.In this context, nationalism within Japan also began to rise, with many people hoping that Japan would enhance its autonomy in various aspects such as economy and diplomacy, and break free from American control.

The United States was not pleased with this development.

It is important to remember that during the 1960s and 1970s, Japan's rapid development was also thanks to the help of the United States.

It was the United States that transferred many electronic industries to Japan and provided them with technical support, which propelled the development of Japanese industries.

However, after Japan grew strong, it turned around and wanted to kick the United States out, wasn't this like biting the hand that feeds you?

The United States, enraged and embarrassed, then directly launched a series of combined blows.

For example, the Plaza Accord, Section 301, and supporting South Korea as a younger brother, among others.

The introduction of this series of combined blows led to a rapid appreciation of the yen, a rapid decline in the competitiveness of export products, and various restrictions on exports to some countries, including the United States.

In order to break free from these restrictions, Japanese companies had to actively go overseas, starting to set up factories abroad and purchasing various overseas assets.

Moreover, at that time, the cost of production factors in some regions, including China, Southeast Asia, and South America, was much lower than in Japan, which further increased the intensity of Japan's overseas layout.After more than 30 years of strategic positioning, Japan's foreign assets have increased significantly compared to 30 years ago. Currently, the sales revenue of Japanese companies abroad has consistently accounted for 40% to 50% of Japan's GDP. Moreover, Japan's overseas wealth has also grown rapidly. In 1994, Japan's external assets were only 259 trillion yen, with external liabilities totaling 181 trillion yen, resulting in a net external asset of 78.2 trillion yen. By 2023, Japan's external assets had risen to 1488.3425 trillion yen, an approximate increase of 4.75 times in 30 years. Additionally, Japan's net external assets have increased from 78.2 trillion yen 30 years ago to 471 trillion yen by the end of 2023, a fivefold increase over the 30-year period.

This growth rate far exceeds the growth rate of Japan's domestic GDP. With its substantial overseas wealth, despite the stagnation of Japan's GDP over the past 30 years, the wealth within Japan has continued to grow. On one hand, Japan's foreign exchange reserves have been steadily increasing.In 1994, Japan's foreign exchange reserves were only $125.8 billion, which rose to $833.89 billion by 2004, and by 2021, the foreign exchange reserves still reached $1.36 trillion. Although there has been a slight decline in these two years, they still amount to around $1.2 trillion.

Over the past 30 years, Japan's GDP has stagnated, but its foreign exchange reserves have increased by about tenfold.

On the other hand, as of the end of 2022, Japan's total net assets (national wealth) held by the government and corporations combined reached 3,999.1 trillion yen, also marking the highest level since comparable data began in 1994.

The reason why Japan's domestic wealth and foreign exchange reserves have diverged from GDP growth is that a significant portion of Japan's wealth is obtained from various parts of the world.

Because of this, even though the Japanese economy has been stagnant for more than 30 years, there has been no collapse domestically; on the contrary, the number of wealthy individuals in Japan has increased.

However, there is an undeniable fact: most of this overseas wealth is concentrated in the hands of a few.

After all, the entities that truly have the strength to expand overseas are generally larger corporations.

Especially for Japan, most of their overseas assets are controlled by the six major financial conglomerates: Mitsui, Mitsubishi, Sumitomo, Fuji, Dai-ichi Kangyo, and Mitsui Fudosan, who control 60% of Japan's assets and industries.

If other new financial conglomerates such as Ayukawa, Furukawa, Okura, Nakajima, Nomura, and others are included, these dozen or so conglomerates control at least 80% or more of Japan's wealth.

This has also led to a significant wealth gap within Japan.Previously, Professor Kenji Hashimoto from Waseda University wrote an article titled "Japan's New Class Society," in which he categorized Japanese households into five social strata.

In 2018, the super-rich class, consisting of 8.4 trillion households, possessed financial assets amounting to over 5 trillion RMB, which is equivalent to 0.15% of the population holding 5.4% of Japan's financial assets. Additionally, the affluent class, comprising 118.3 million households, had a total of 12.9 trillion RMB in financial assets. On the other hand, the basic class, which includes 42.031 million households, held a mere 40.38 trillion RMB in financial assets, representing 78.2% of the population with a mere 43.7% share of the financial assets.

From this, it is evident that despite the continuous growth of Japan's overseas wealth over the past few decades, most of this wealth has flowed into the pockets of the financial oligarchs, with the average citizen not reaping the benefits. To ensure that the general public enjoys the fruits of this growth, it is essential to focus on the solid development of domestic industries. This approach will allow the wealth of the grassroots population to increase in tandem, preventing the widening of the wealth gap.