Warren Buffett has upped his stakes in Japan once again

Berkshire Hathaway’s stakes in Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo have now increased—on average—to at least 8.5%, the company confirmed today.

The investment firm also revealed that the aggregate value of these stakes now puts Japan as Berkshire’s second-largest geography—coming in behind the U.S.

Buffett began investing in Japan’s trading houses—known as sogo shosha—in 2020 and since then has been strengthening his ties to the nation, as well as visiting the country earlier this year.

During that trip, the Oracle of Omaha sat down with bosses of the five companies at the Four Seasons Hotel in Tokyo, with insiders saying the conversation centered around the sogo shosha’s move away from commodities.

Ahead of these meetings, Buffett had made it clear he wanted to be the first port of call if the firms were looking to raise funds, telling Nikkei Asia: “We 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 we would like a partner’, or whatever.”

The seasoned investor—reportedly worth $118 billion according to Bloomberg’s Billionaires Index—has now doubled down on his investments, with Berkshire’s stakes increasing this week from the 7.4% they sat at previously.

Buffett has previously set a self-imposed ceiling of how much he’s willing to sink into the five brands, saying the maximum stake he will hold is 9.9%.

The release adds: “The company will make no purchases beyond that point unless given specific approval by the investee’s board of directors.”

Whether or not this cut-off is limited to the five companies in question, or Japanese stock as a whole, remains to be seen—though Berkshire currently holds no other investments in the country.

Berkshire boom

The sogo shosha have enjoyed basking in the light of Buffett’s attention.

In the days following the announcement that Berkshire had upped its stakes from 6% to 7.4% overseas investors piled in, buying $7.83 billion in Japanese stocks during five days of trading through April 14.  

Some of the stocks got another boost on June 19 following the latest announcement.

Mitsui was up 0.31% over the course of the day with a particular surge in afternoon trading after Berkshire’s announcement, Mitsubishi was up 0.25% while Marubeni was up 0.22%.

Conversely Itochu was down 0.57% and Sumitomo was down 0.52% over the course of the day—though this is a fraction compared to the increases they have enjoyed this year alone, up 39.6% and 41% respectively.

The shares in the five firms are near their all-time highs.

Markets Insider placed a valuation of $15 billion on Berkshire’s Japanese assets in May, up from the $6 billion bet Buffett first made back in 2020.

Given this week’s announcement, that top line is sure to swell further, though not everyone is convinced that Japan is a sure winner.

Premature optimism?

A recent note from analysts at Banks of America—another of Buffett’s most prized investments— said the “buy Japan” call may be “premature”.

In May strategists Shusuke Yamada and Tony Lin said: “We remain bearish on JPY in 2023 despite its cheapness for two reasons—a persistent foreign direct investment (FDI) deficit and a potential rise of yen-carry trade.”

The pair suggested a longer-term strategy which is a tactic the team at Berkshire have confirmed they are using, saying the company intends to hold the investments over the long term.

The focus on Japan has also drawn Berkshire away from Taiwan, after the company did a U-turn on a multi-billion dollar investment in Taiwan Semiconductor Manufacturing Company, or TSMC, following concerns about geopolitical tensions with China.

Despite praising TSMC, calling it a “fantastic enterprise”, Buffett told the company’s annual shareholder meeting in May: “I feel better about the capital that we’ve got deployed in Japan than in Taiwan. That is the reality, and I’ve reevaluated that in the light of certain things that have been going on.”

A week later, Berkshire Hathaway revealed that it had sold its entire remaining stake in the Taiwan Semiconductor Manufacturing Company, exiting an investment the company had disclosed just six months earlier.