Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: THURSDAY, June 29, 1995                   TAG: 9506290052
SECTION: BUSINESS                    PAGE: B-7   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                  LENGTH: Medium

UNCLE SAM STILL IN HOCK; DEBT GAP WIDENS 24.9%

The United States maintained its position as the largest debtor nation last year as the gap widened between foreign holdings in the United States and American assets abroad.

The Commerce Department reported Wednesday that the nation's net debtor position worsened by 24.9 percent - from a revised $545.3 billion at the end of 1993 to $680.8 billion last year.

At the same time, the British replaced the Japanese as the largest holder of direct U.S. investments, defined as ownership of 10 percent or more of a company. British holdings were $102.4 billion, compared with $99.2 billion for the Japanese.

Analysts said Japanese investors, because of some huge losses, have been having second thoughts recently in placing their money in the United States.

Meanwhile, the declining value of the U.S. dollar against the currencies of Japan and Germany probably contributed to the widening debt gap.

But analysts saw a glimmer of hope in the settlement the United States and Japan reached Wednesday in auto trade talks.

``The weaker dollar makes it harder to buy abroad and easier for others to buy in the United States,'' said Charles Renfro, an economist with the Alphametrics forecasting service in Bala Cynwyd, Pa. ``If the dollar is weak, there is the potential for a foreign country to buy a U.S. company more cheaply.''

The agreement in the auto talks could help slow the growing trade deficit the United States has with Japan, he said.

America's trade deficit hit an all-time high of $11.37 billion in April as sales of Japanese cars in the United States surged in anticipation of tariffs on Japanese luxury cars. The tariffs were headed off by an 11th-hour agreement Wednesday.

The United States was considered a net creditor nation as recently as 1986, with $34.6 billion more in assets overseas than foreigners owned in this country. The assets are valued at the current cost of replacement.

The United States became a net debtor country in 1987 for the first time since before World War I.

The gap has widened in the past eight years as foreigners accumulated more holdings in U.S. corporations, stocks, bonds and real estate than Americans own overseas.

The net debtor figure is not a debt in the strictest sense because it includes bank loans and all forms of investment. It represents the amount that would be owed if foreigners liquidated all of their U.S. holdings.

The United States was transformed from the world's largest creditor country at the beginning of the 1980s to the largest debtors as huge trade deficits began running up in 1982.

Americans transferred billions of dollars into the hands of foreigners to pay for imported cars and television sets. The money came back to this country through a range of investments, including securities, movie studios and real estate.