Why Is Buffett Lifting His Stakes In Japan Again?

Buffett has once again made headlines by increasing his stakes in Japan's top five trading houses, just three weeks after hinting at further investments in Japanese stocks.

According to a filing submitted by Berkshire Hathaway to Japan's Ministry of Finance this past Monday, the conglomerate has raised its stakes in the five major Japanese trading houses as follows: Mitsui & Co., Ltd. from 8.09% to 9.82%, Mitsubishi Corporation from 8.31% to 9.67%, Sumitomo Corporation from 8.23% to 9.29%, Itochu Corporation from 7.47% to 8.53%, and Marubeni Corporation from 8.30% to 9.30%

By the close of trading on Monday, shares of all five trading houses had risen, with Mitsubishi Corporation up by 2.6%, Sumitomo Corporation by 2.3%, Mitsui & Co., Ltd. by 1.4%, and both Itochu Corporation and Marubeni Corporation by 1.6%.

The Japanese stock market has recently been under pressure due to the Bank of Japan's decision to raise benchmark interest rates, a stronger yen, and the risks posed by global trade wars. Buffett's continued interest in Japanese stocks is seen as a positive signal that could help restore market confidence.

Buffett's investment in Japan's five major trading houses was first disclosed in 2020, sparking a surge in Japanese stocks and driving up the share prices of these companies several times over. Buffett increased his holdings again in June 2023.

In October of last year, Berkshire Hathaway issued Japanese bonds totaling 281.8 billion yen (approximately $1.9 billion), drawing significant attention from investors. At the time, there was speculation that Berkshire's next move might be to increase its investment in Japan's five major trading houses.

This speculation has proven accurate. Last month, in his annual letter to shareholders, Buffett indicated that Berkshire Hathaway is seeking to increase its stake in Japanese trading houses, planning to hold these shares for decades and committing to support their boards of directors.

Originally, Buffett's stake in the five major Japanese trading houses was capped at below 10%. However, in this year's annual letter to investors, he mentioned that the Japanese trading houses have agreed to moderately relax the upper limit on shareholding ratios.

The world-famous investor predicts that his stakes in Japan's five major trading houses will yield an annual dividend income of approximately $812 million.