Warren Buffett is increasing investments in Japan – and could continue to do so in the future

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• Warren Buffett increases holdings in Mitsubishi, Mitsui, Itochu, Marubeni and Sumitomo
• Buffett open to joint deals with Japanese companies
• Yen bond issue planned

In August 2020, Warren Buffett surprised the stock market with a big investment in Japan. At that time, with his investment holding company Berkshire Hathaway, he acquired a stake of a good five percent each in the five large Japanese trading companies Mitsubishi, Mitsui, Itochu, Marubeni and Sumitomo for a total of more than six billion US dollars. After the legendary investor had already increased his involvement in the companies in November 2022 to a stake of more than six percent each, the next increase recently followed, according to “CNBC”: According to the US broadcaster, Buffett now holds 7.4 percent each the so-called “Sogo Shosha”, as Japan’s five largest trading companies are also known. In an interview with the Japanese media portal “Nikkei”, the oracle of Omaha was “very proud” of the previous investment in the company and indicated that it might expand this further in the future.

That’s why Warren Buffett is a fan of the Japanese retail giants

Mitsubishi, Mitsui, Itochu, Marubeni, and Sumitomo are conglomerates that — much like Buffett’s Berkshire Hathaway — are active in a variety of areas. Among other things, they import metals, food and textiles to resource-poor Japan, but they also offer services for the manufacturing industry. According to “Reuters”, they are also heavily involved in the real economy through their activities in the areas of raw materials, shipping and steel and have made a significant contribution to Japanese economic growth in the past. Overall, the businesses of the five companies are very complex – which Warren Buffett does not seem to deter. “We believe these five companies represent a cross section not just of Japan but of the whole world,” he told Nikkei. “They are really so similar to Berkshire. They own many different things,” said the investor, who is known for only investing in companies whose business model he understands – and that should be the case here due to the explicitly mentioned similarity to his investment holding company .

Right now, according to Buffett, Berkshire Hathaway is only invested in the five retail companies in Japan. Additional investments in Japan are “always a matter of consideration”. “There’s always a few that I think about,” the Berkshire chairman said. The fact that he is currently concentrating on the five major trading houses is probably also due to their attractive dividend policy and share buyback programs. For example, Mitsui and Mitsubishi increased their share buybacks in February, according to Bloomberg. “If they buy back their shares, we generally see that as a plus. We like the idea of ​​the number of shares going down,” the star investor said in the Nikkei interview.

Buffett, who is currently on his first trip to Japan since 2011, also told Nikkei that he plans to meet with the companies later this week “to really just have a discussion about their businesses and ours to emphasize support”. The star investor also signaled that he could imagine working with the trading houses on future deals. Because like Berkshire Hathaway, Mitsubishi, Sumitomo and Co. are also active as investment companies. “We don’t think it’s impossible that we’ll work with them on any particular deal at some point in the future,” Buffett said. “We’d love for one of the five to come up to us and say, ‘We’re thinking about doing something very big, or we’re in the process of buying something, and we’d like to have a partner or whatever’ ‘ the Oracle of Omaha continued.

Buffett Statements Drive Japanese Stocks – Here’s How Analysts React

According to Buffett’s statements on Tuesday, shares in Mitsubishi, Mitsui, Itochu, Marubeni and Sumitomo were clearly up on the Japanese stock exchange. Also on Wednesday, all five corporate stocks posted clear gains. However, the stocks have also generally had a strong run in recent months and have in some cases been able to show a double-digit increase in performance since the beginning of the year.

Analysts are now hoping that the expansion of Berkshire’s Japan investment and Warren Buffett’s statements could give the Japanese stock market new impetus. Buffett’s interest is “a reminder that there are attractive and inexpensive investment opportunities in Japan,” said Lorraine Tan, director of equity research at Morningstar Asia, according to Bloomberg. Hiroshi Namioka, chief strategist at T&D Asset Management, also expressed hope that Buffett’s comments would “encourage foreign investors [könnten]to invest in Japanese stocks, especially in value stocks”. John Vail, Chief Global Strategist at Nikko Asset Management, was a bit more skeptical. According to “Bloomberg”, he hopes that the investment will support domestic optimism, but sees it in the long term but only a “moderately positive effect on overseas perceptions of the Japanese market.” “Buffett’s investments a few years ago haven’t boosted the market much in the short term, other than the stocks he picked or something like that,” Vail said.

Berkshire Hathaway prepares to issue yen bond

Berkshire Hathaway may also be planning further investments in the land of the rising sun in the near future, because it has been known since the beginning of April that Buffett Holding is preparing to issue a yen bond. According to “Nikkei”, Berkshire issued such a financing instrument for the first time in 2019 – and then joined the five trading companies in August 2020. The issue of a new bond is therefore seen as a signal that Berkshire could further increase its investment in Japan. However, according to the Japanese news portal, underwriter Mizuho Securities involved in the issue indicated that part of the money raised will go towards refinancing debt maturing this year. In addition, according to “Nikkei”, Berkshire Hathaway has issued such a yen bond every year since 2019 – most recently in December 2022. However, the holding company has now increased its holdings in Japan for the third time since 2020 – further investments in the Asian country are likely to be completely absurd So don’t be country.

Editorial office finanzen.net

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