Buffett Bets More on Japan

Buffett Bets More on Japan

Warren Buffett is considering upping his stake in Japanese stocks, according to an article in Bloomberg. The billionaire investor, who is currently in Japan, recently told the Asian business news outlet Nikkei that he raised his Japanese holdings from 5% to 7.4% and is looking to invest even more.

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The statement was a boost to Japan’s biggest trading houses, which saw their shares jump after the report. Buffett likened the country’s five major trading houses to his own conglomerate, Berkshire Hathaway, telling Nikkei that his company “would love if any of the five would come to us ever and say, ‘We’re thinking of doing something very big or we’re about to buy something and would like a partner,” according to the article. The Japanese trading houses date back centuries and offer a wide array of assets, from energy to food. Given Buffett’s penchant for value stocks, it’s assumed that “he would be looking for well-managed companies that enjoy economic moats which he thinks are undervalued,” Lorraine Tan of Morningstar Asia told Bloomberg. But beyond Buffett, there are many “well-priced investment opportunities in Japan,” for all foreign investors, Tan says, and Buffett’s interest may very well spur those investors on to seek out those opportunities.

Shares at Japan’s biggest trading house, Mitsubishi Corp., surged 3% in the wake of Buffett’s interview, while Mitsui & Co. jumped 3.7%, with Marubeni Corp., Sumitomo Corp., and Itochu Corp. also seeing gains. But foreign investors have been selling off Japanese stocks and futures from the Tokyo Stock Exchange since last month’s banking crisis, and the MSCI Asia Pacific—minus Japan—is down 8.6% over the last 12 months. And when Buffett deepened his investments in Japan three years ago, the gains had only “a moderately positive effect in the intermediate to long term” on the Japanese market, John Vail at Nikko Asset Management told Bloomberg.

But Japanese trading houses were already on the rise even before Buffett’s interest in them, posting gains and higher company earnings over the last year, with Mitsubishi up 14% in the last 12 months. Meanwhile in the U.S., Berkshire is about to price its new bonds, with the company promoting a seven-tranche bond sale where it will offer wider credit spreads than it did last year. And since 2020, Berkshire has been one of the biggest overseas issuers of yen bonds, when it snapped up shares at Japanese trading companies after selling off in one of the largest yen bond deals by a foreign company.