Warren Buffett’s company, Berkshire Hathaway, has increased its stakes in five major Japanese trading houses. According to regulatory filings, Berkshire now owns between 8.5% and 9.8% in each of these companies: Mitsui & Co., Mitsubishi Corp., Sumitomo Corp., Itochu, and Marubeni. These trading houses are century-old conglomerates that operate in various sectors such as energy, metals, and food.
Their diversified portfolios and strong market positions align well with Buffett’s long-term investment strategy. Executives from Mitsubishi and Itochu view Berkshire Hathaway’s investments as a sign of confidence and commitment. They believe it boosts their credibility and future prospects.
Buffett’s move may encourage other international investors to consider Japanese stocks. It could also strengthen market sentiment towards Japan’s economic stability and growth potential. While Berkshire Hathaway has made various global investments, this is one of Buffett’s most substantial commitments in Japan.
Buffett’s confident Japan investment move
Historically, he has favored investments that promise stable returns and robust growth, which these Japanese trading giants embody. In 2024, Buffett took a cautious approach as the U.S. stock market experienced turbulence.
Berkshire reduced its stock holdings, repurchased less of its own stock, and accumulated $334 billion in cash and short-term U.S. Treasury bills. Amid these conditions, Buffett turned his attention to opportunities abroad, particularly in Japan. In Berkshire’s recent letter to shareholders, Buffett and his successor, Greg Abel, admired the Japanese companies, highlighting their prudent capital deployment, shareholder-friendly practices, and reasonable executive compensation.
Japan’s economy currently faces both opportunities and challenges. Interest rates remain low, and the Bank of Japan is cautiously raising rates to address inflation without hindering employment progress. Real wages recently grew at their fastest pace since the mid-1990s, which could boost consumer spending.
Buffett’s investment in Japan underscores the value of geographical diversification in investment portfolios. Diversifying into foreign markets can present attractive valuations and reduce exposure to risks in any single economy.
Image Credits: Photo by Su San Lee on Unsplash
