Berkshire Hathaway CEO Greg Abel announced the conglomerate's enduring commitment to its investments in five prominent Japanese trading houses: Mitsubishi, Mitsui & Co., Itochu, Sumitomo, and Marubeni. Berkshire initially invested in these companies six years ago and has progressively increased its stake in each to over 10%. Abel stated that these are long-term investments, intended to be held for decades, with expectations for continued growth in underlying earnings and potential increases in dividends and share repurchases.
Abel, speaking from Japan in an interview with CNBC, further signaled that Berkshire is considering increasing its stakes in these trading houses as part of a broader strategy to deepen global deal-making. This renewed focus on Japan investments aligns with Abel's first Tokyo visit since becoming CEO, where he met with executives from the trading houses to explore collaboration across sectors like energy, commodities, and technology. The discussions highlighted opportunities for joint investments and mergers and acquisitions, with Berkshire keen on combining its capital with the trading houses' deal pipelines in areas like infrastructure, renewables, and industrial supply chains.
In a clear sign of its expanding support for Japan, Berkshire Hathaway announced in March a 2.49% strategic investment in Tokio Marine Holdings. The ambition behind this investment is to collaborate with the insurer on global investments, including M&A. While Abel supports a deal if it benefits Tokio Marine and Berkshire, he declined to comment on specific acquisition targets, such as the Financial Times' report of Tokio Marine exploring a deal to acquire Suncorp Group.
Abel also addressed concerns regarding rising Japanese bond yields, stating that none of the trading companies viewed them as a fundamental challenge. He noted that while Japan's 10-year bond yield hit a 30-year high of just over 3%, it remains modest compared to other global yields, such as the U.S. 10-year Treasury Yield, which reached almost 4.8%. Berkshire Hathaway expects to continue raising debt in yen as appropriate, despite the higher yields.
The strategic rationale behind Berkshire's Japanese investments lies in the diversified revenue streams and deep global networks offered by the trading houses, which complement Berkshire's long-term investment philosophy. These companies' exposure to commodities, renewable energy, and global logistics aligns with the demand for resilient cash flows and tangible assets. For Berkshire, these investments provide geographic diversification and direct access to established project pipelines.
