“Japanese banks provided high volumes of credit for a long time, but the population structure and economic growth have slowed. Japan’s demographic issues have reduced credit demand. People have turned more toward saving.” 

Indeed, Japan has a rapidly aging population, with a declining youth demographic. This directly affects credit needs. Bank manager Ayumi Saito states, “As the young population decreases, demand for housing and consumer loans has fallen. We are also more selective when granting credit.” Although Japan’s external assets reached a record level in 2024, Germany surpassed Japan with 569.7 trillion yen. This is explained by Germany’s strong current account surplus and the weakening of the Japanese yen. 

Countries like China and the U.S. have increased their lending thanks to rapidly growing economies. Chinese economist Li Wei explains, “China rapidly expanded its credit volume and focused on technology investments. That’s why we had to surpass Japan.” Meanwhile, other major economies like the U.S. and China have implemented more aggressive credit market policies. This has caused Japanese banks to lose market share. Consumer spending and investments in Japan’s domestic market also remained below expectations. 

New Global Balances and Japan’s Roadmap 

Japan losing its credit provision leadership has shifted the balance in the financial world. Bank employee Kenji Tanaka says, “Now, size alone is not enough to compete. Flexibility and technological infrastructure are also very important.” 

Banks are focusing on digitalization and sustainable projects. Investors are also prioritizing these areas. Financial analyst Yuki Matsuda says, “The future of lending will be in green energy and technology investments. Japan must secure its place in these fields.” Japan’s external liabilities increased by 10.7%, reaching 1,125.97 trillion yen. Also, the Japanese yen depreciated; by the end of 2024, the dollar rose 11.7% from 141.40 yen a year ago to 157.89 yen. This played a significant role in Japan’s financial balance. 

The decline in Japan’s credit providing power is not just a numerical loss. It signals a fundamental shift in market dynamics. In the coming years, more balanced, innovative, and sustainable financial models will emerge. 

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