Berkshire Hathaway Plans to Increase Stake in Japan's Trading Houses

Berkshire Hathaway is set to gradually increase its ownership in Japan’s five largest trading houses. This announcement was made by Warren Buffett in an annual letter to shareholders, which is expected to have a positive impact on their stock prices in Tokyo.

Initially, Berkshire Hathaway had agreed to keep its stakes in these trading companies below 10%. However, the trading houses have now agreed to lift that ceiling slightly as Berkshire approaches its threshold limit.

The five trading houses in question are Mitsubishi, Mitsui, Itochu, Sumitomo, and Marubeni. Over the longer term, the shares of these companies have benefited from Buffett’s keen interest in them. Yet, they have faced challenges in recent months, mirroring the broader decline seen in the Japanese stock market.

Market participants are keeping a close eye on Buffett's comments, especially with the Japanese market reopening on Tuesday after a public holiday. The performance of Tokyo stocks has lagged compared to global markets, partly due to a stronger yen which has affected exporters adversely. While the Topix index is down approximately 1.7% this year, the MSCI Asia Pacific index has shown an increase of around 4.6%.

Buffett’s recent actions have sparked speculation among investors about his next initiatives, particularly following Berkshire Hathaway’s sale of its largest yen bond since 2019.

In his letter, Buffett commended the trading houses for their prudent financial management, which includes increasing dividends when suitable, executing share buybacks sensibly, and maintaining more moderate executive pay compared to their U.S. counterparts.

Berkshire has expressed its intent to maintain its position in Japan for many decades to come, signaling a long-term commitment and looking for new opportunities for collaboration with these trading houses.

Discussions are reportedly underway between Berkshire and Mitsubishi regarding potential joint ventures on specific projects. The Tokyo-based trading house has committed to enhancing its corporate value and strives to boost its share prices over the medium to long term.

Berkshire, Buffett, Japan