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Japan’s weak yen and attractive valuations have caught the attention of Berkshire Hathaway, the investment firm run by US billionaire Warren Buffett. Last week, the company raised Warren Buffett’s Japan investments, with Berkshire acquiring additional stakes in Japan’s top five trading houses.
Berkshire has increased its stake in Mitsubishi Corp to 6.59% from 5.04%, in Mitsui & Co to 6.62% from 5.03%, in Itochu Corp to 6.21% from 5.02%, in Marubeni Corp to 6.75% from 5.06%, and in Sumitomo Corp to 6.57% from 5.04%.
Warren Buffett’s Japan investments
The increase in Warren Buffett’s Japan holdings is not a surprise as Berkshire announced in 2020 that it had acquired over 5% stakes in each of these trading houses. The investment firm had then said that these are long-term investments and Berkshire would increase its holdings in these firms to as much as 9.9% depending on the market conditions.
“I am delighted to have Berkshire Hathaway participate in the future of Japan and the five companies we have chosen for investment,” Buffett had said back in 2020. While Berkshire has not revealed exact details of the value of these investments, current prices indicate the company is invested about $11 bn in the five Japanese trading houses.
The investments in trading houses make sense as Buffett has struggled to find opportunities within the US due to a difficult environment. The share prices of the five trading houses have risen in double digits since the beginning of 2022, compared to a nearly 4% drop in Nikkei 225.
“Trading companies’ high stock prices are associated with high commodities prices, but there’s much more to their businesses than that,” Takashi Hiroki, chief strategist at Monex, told Nikkei.
Japanese trading houses have been enjoying higher profits this year due to the rise in commodity prices and the decline of the yen which has benefitted exports. The companies, also known as sogo shosha, have reported bumper profits in previous quarters, and are expecting a higher full-year profit thanks to surging commodity prices.
Warren Buffett’s Japan investment appetite is increasing, as Berkshire has now started marketing yen bonds that may be issued as early as December 1. The company will sell bonds with a maturity of three years to 30 years, as per Mizuho Securities.
Berkshire Hathaway is quite active in the yen bonds space, and in 2019 priced one of the most extensive yen bonds by a foreign firm. Until now the investment firm has indulged in four separate bond deals in the Japanese currency.
The yen is at multi-decadal lows, and the Bank of Japan has stuck to its ultra-loose monetary policy, which is attracting a lot of foreign companies to issue debt at very low-interest rates.
Buffett, who has historically focussed on US firms, seems to be deal-hunting in Asia. The investments in the Japanese trading houses come on the heels of Berkshire Hathaway investing $4 bn in Taiwanese chip maker TSMC. On the other hand, Berkshire has reduced its stake in the Chinese EV maker BYD over the past few months.
