Core Insights - South Korea's current account surplus with the United States reached a record high of $118.2 billion in 2024, highlighting the challenges faced by Lee Jae-myung in negotiating a trade agreement with Trump [1] - The surplus has been increasing annually since 2019, indicating a growing trade relationship between South Korea and Washington, while also suggesting potential friction [1] - South Korea has been identified as one of the top ten countries contributing to the U.S. trade deficit, as noted by Trump [1] Trade Negotiation Context - The planned meeting between the two leaders at the G7 summit in Canada was canceled due to escalating tensions in the Middle East, which adds complexity to the trade discussions [1] - Lee Jae-myung's nominated Prime Minister candidate expressed the President's desire to reach an agreement before the end of July to avoid potential increases in baseline tariffs [1]

Core Viewpoint - The U.S. Treasury Department has added Ireland and Switzerland to its "currency monitoring list," increasing the total number of closely monitored countries to nine, despite no major trading partners being accused of currency manipulation for unfair trade advantages in 2024 [1][3]. Group 1: Currency Monitoring List - Ireland and Switzerland were added to the currency monitoring list due to their significant trade surplus with the U.S. exceeding $15 billion and a current account surplus over 3% of their GDP [3]. - The report indicates that countries are automatically placed on the monitoring list if they meet specific criteria related to trade surplus and foreign exchange purchasing behavior [3]. Group 2: Responses and Implications - The Swiss National Bank denied any currency manipulation, asserting that it does not attempt to distort trade balances or gain unfair competitive advantages [3]. - The report marks the first currency policy report since Trump's return to the White House, with a noticeably stronger tone compared to previous reports during Biden's administration, which did not label any country as a currency manipulator [3]. - The overall strength of the U.S. dollar has increased by an average of 7% against major currencies in 2024, reducing the incentive for countries to devalue their currencies [3].

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Viewpoints - The report discusses the potential for Asia to achieve a sustainable rebalancing, suggesting that while the current account surplus may narrow, the consumption-to-GDP ratio is unlikely to change significantly, indicating that true and lasting rebalancing may not be achieved [2][8][35] Summary by Sections Current Account Trends - The report details the trends in bilateral current account balances between Asia and the US, highlighting that Asia's trade surplus with the US reached USD 760 billion, accounting for 55% of the US trade deficit [7][12] - It predicts that Asia's current account surplus as a percentage of GDP will narrow, primarily due to a slowdown in trade cycles and potential increases in purchases from the US [7][34] Economic Structure and Growth Model - Asia's persistent current account surplus reflects a manufacturing-driven growth model, with high savings relative to investment [8][24] - The report notes that Asia has maintained a current account surplus for 35 consecutive years, with a historical high of USD 1.1 trillion in Q1 2025, representing 4.1% of GDP [12][13] Investment Position - Asia's international investment position has grown to USD 45 trillion, surpassing both the US and Eurozone [49][50] - The report indicates that since 2018, Asia's holdings in US securities have increased by USD 2.8 trillion, now totaling USD 8.6 trillion, with the share of US assets in Asia's portfolio rising from 37% to 41% [65][72] Future Projections - The report forecasts a slight narrowing of the current account surplus to USD 0.9 trillion (3.1% of GDP) in 2025, down from USD 1.0 trillion (3.6% of GDP) in 2024 [34][36] - It emphasizes that the expected narrowing of the current account surplus should not be viewed as a sustainable rebalancing, as structural changes in savings and consumption patterns are not anticipated [35][66]

Group 1 - Germany has become the largest creditor nation globally with a net foreign asset exceeding 3.6 trillion USD, surpassing Japan's 34-year dominance [1][4] - The increase in Germany's net foreign assets is attributed to a significant trade surplus and a record current account surplus of 248.7 billion EUR in 2024 [1][4] - Despite being the largest creditor, German economists express concerns about the country's poor investment performance abroad, with a nominal return rate of only 4.8% on overseas investments [2][4] Group 2 - Direct investment in Germany has declined while cross-border investments have surged, leading to a total overseas claim of 13.9 trillion EUR against domestic liabilities of 10.4 trillion EUR [5] - The rise of Germany as the largest net creditor may provoke reactions from the U.S., particularly from figures like Trump, who criticize Germany's trade surplus with the U.S. [5] - The U.S. has a net foreign debt of 26.2 trillion USD, indicating that it benefits significantly from economic globalization despite not being a creditor nation [5]

Group 1 - Japan's net external assets reached 533.05 trillion yen (approximately 3.7 trillion USD) by the end of 2024, marking a 13% increase year-on-year and setting a new historical high [1][4] - Germany surpassed Japan for the first time with net assets totaling 569.7 trillion yen, ending Japan's 34-year reign as the world's largest creditor nation [1][4] - China ranked third with net external assets of 516.3 trillion yen [1][4] Group 2 - Net external assets represent the total overseas assets of a country minus the total foreign assets within that country, serving as an important indicator of national wealth [4] - Germany's rise is attributed to a consistently expanding current account surplus, which reached 248.7 billion euros in 2024, compared to Japan's current account surplus of 29.4 trillion yen (approximately 1.8 billion euros) [4] - The appreciation of the euro against the yen by about 5% last year increased the valuation of Germany's overseas assets when measured in yen [4] Group 3 - Japan's Finance Minister, Kato Katsunobu, stated that Japan's net external assets continue to grow steadily, and changes in ranking do not indicate a fundamental shift [4] - The depreciation of the yen has led to increases in both overseas assets and liabilities for Japan, although asset growth has outpaced liabilities, partly due to expanded overseas business investments [4] - Japanese companies are increasingly directing foreign direct investments towards the US and UK, particularly in the finance, insurance, and retail sectors [4] Group 4 - The pace of Japanese companies' overseas expansion may be influenced by geopolitical policies, with some Japanese firms potentially accelerating the transfer of production capacity to the US to mitigate trade risks [4] - This ongoing trend could further reshape the global creditor nation landscape [4]