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JAPAN DOESN'T FEEL RICH DESPITE LARGE HOLDINGS

Who's the richest of them all? We are, says Japan.

Even as the country struggles to shake off the effects of a long recession and recover from a crushing load of bad debt, a new government report says Japan remains the world's wealthiest nation in terms of overseas net assets.For the fifth year in a row, Japan owns more of the outside world than anyone else, according to a Finance Ministry report released Friday.

But that doesn't mean the average Japanese citizen, hard-pressed by high prices and worried by tough economic times, feels at all affluent.

"Wealth and standard of living are not the same thing," says Russell Jones of Lehman Brothers Japan. "This is a good measure of overall wealth, though, and it shows Japan is the wealthiest nation around."

The measure, which subtracts overseas liabilities from overseas assets, shows Japan to be $720 billion in the black with the outside world. That's a 13 percent increase over last year's surplus.

Germany was a distant second, with a net balance of $16.16 billion in overseas assets as of the end of June 1995. The United States had a net deficit of $63.45 billion as of the end of 1994, ministry officials said.

The Finance Ministry said its foreign portfolio grew last year primarily because of the rising value of Japanese stock and bond holdings overseas, and the movement of yen into overseas factories for cheaper production to counter Japan's costly currency.

The bulk of its overseas assets was in its $1.613 trillion in long-term investments, according to the report. And more than half of that amount is plowed into securities investments, the report said.

"It shows people are saving a lot, and offsetting consumption with the large savings," Ken Okamura, a strategist with investment bank Dresdner Kleinwort Benson (Asia) Ltd., said of the report.

That high savings rate is only natural, he said, given that the percentage of Japanese nearing retirement is rising.

Some say the propensity to invest abroad points to weaknesses in Japan's financial markets, where company earnings reports are often considered unreliable and dividends are slim compared to European and American markets.

Investments abroad are picking up as the economy appears to be slowly emerging from recession. The International Monetary Fund recently predicted Japan's economy will grow 2.7 percent in 1996, up from 0.9 percent in 1995.

Analysts say that overseas assets have proven a consistently good indicator of a currency's strength and stability - and a stable currency could be a positive factor in encouraging Japan's nascent economic recovery.

The report showed that Japan's private sector held net assets totaling $485 billion, while the public sector held net assets totaling $234 billion.

But whether all of that surplus will help strengthen domestic demand is another matter, analysts said.

"It's better to have more net assets than liabilities. You can spend more," says Jones of Lehman Brothers Japan. "Still, I don't think anyone is going to go out and start buying things."