Berkshire Hathaway CEO Greg Abel has reinforced the conglomerate's commitment to its substantial investments in five major Japanese trading houses: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. Berkshire, which initially acquired just over 5% stakes around Warren Buffett's 90th birthday six years ago, has now received approval from each of these companies to increase its holdings beyond 10%. Abel stated that these are long-term investments intended to be held for many decades, and Berkshire is actively building strong relationships with these firms to explore additional opportunities in Japan and globally.
Berkshire Hathaway's aggregate investment in these trading companies is approximately $13.8 billion, representing a cornerstone of its international diversification strategy. The initial investment was made with a guarantee to stay below a 10% stake, but after building relationships and seeing strong performance, Berkshire requested and received permission to exceed this limit. The trading houses have demonstrated good capital management through share repurchases and increased dividends, which has pleased Berkshire.
Regarding the recent rise in Japanese bond yields, with the 10-year bond reaching a 30-year high of 3%, Abel noted that none of the trading companies raised it as a fundamental challenge. He described these borrowing costs as still relatively modest. From Berkshire's perspective, while it has over $15 billion in yen-denominated debt, its bond portfolio's cost basis reflects its investments, and it maintains a significant carry (difference between dividend income and interest paid). Berkshire still envisions issuing yen debt as appropriate, anticipating continued growth in the underlying companies' earnings, likely dividend increases, and ongoing share repurchases, which will offset any incremental borrowing costs.
Berkshire's continued support and increased stakes are seen as a significant vote of confidence in the Japanese trading sector. Warren Buffett had previously praised these firms for their sensible capital allocation, including dividend increases and share buybacks, and less aggressive executive compensation compared to U.S. counterparts. The market has reacted positively to Berkshire's commitment, with trading house shares previously rallying after Buffett's initial investment and subsequent signals of increased holdings.
