Warren Buffett’s big bet on Japan

Warren Buffett has made $8 billion in profits from investments in five Japanese trading houses, and speculation is growing that he may increase these bets. 

Over the past few years, Berkshire has increased its investments in Japan as the cheap cost of capital has made it highly attractive for foreign investors. 

Berkshire Hathaway owns more stocks in Japan than in any other country outside the United States. 

In 2023, Buffett increased his company’s stake in five Japanese trading companies: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. 

Buffett said in an interview with Nikkei that he intends to increase Berkshire’s exposure to Japanese equities further in the coming years. 

The investment holding company has been buying up shares in the five trading companies since August 2020. 

They are essentially conglomerates that invest in all sorts of things globally, from mining to retail.

Buffett compared them to his own company in the interview, saying, “They are really so much similar to Berkshire. They own a lot of different things.”

The investments in Japanese companies also follow Buffett’s timeless investing philosophy. The conglomerates generate strong cash flow and increase their returns to shareholders through dividends and buybacks. 

Berkshire also leverages Japan’s extremely low interest rates to issue debt to buy Japanese shares effectively for free. 

In October 2024, Berkshire sold bonds worth $1.89 billion in Japan – its biggest-ever yen-denominated deal. 

The sale made Berkshire the largest foreign issuer of bonds in 2024, raising over $3 billion to invest around the world. 

Equity-market investors are closely watching the billionaire’s fundraising in Japan because Buffett has previously used yen funds raised in the bond market to purchase holdings in Japanese companies. 

His stake increases in five major trading houses helped drive up the 225-issue Nikkei average to a record high earlier this year. 

Should Berkshire’s investment choices widen to other stocks such as banks, insurers and shippers, as some analysts speculate, it could lead to more gains for the broader Japanese market.

“The fact that the company was able to raise this much in a single year is a testament to the confidence that investors have in Berkshire,” Haruyasu Kato, a fund manager in Tokyo at Asset Management One, told Bloomberg. 

“It is also a deal that demonstrates the strength of demand from Japanese investors for debt carrying good yields.”

According to the Wall Street Journal, the company’s bonds currently have an average interest rate of 1.1%, while Berkshire’s Japanese investments have an average dividend yield of 3%. 

Buffett appears willing to expand his reach into Asia, telling Indian Prime Minister Narendra Modi that the local market has unexplored opportunities.