Buffett’s love for Japan may run farther after $8 billion paper profit

Warren Buffett’s Berkshire Hathaway has made billions of dollars from its big investments in Japan, and the Oracle of Omaha’s love for the land of the rising sun is only growing deeper. The Omaha-based conglomerate priced 263.3 billion Japanese yen of bonds worth $1.7 billion, marking one of its biggest yen bond sales, according to a regulatory filing released Thursday. Issuing Japanese debt has allowed Berkshire to take out the currency risk when buying stocks overseas. Berkshire first started selling Japanese debt in 2019 and used the proceeds to fund its purchase of five local trading houses — Itochu , Marubeni , Mitsubishi , Mitsui and Sumitomo . Berkshire now owns about 9% of each of the five and the conglomerate had made unrealized gains of more than $8 billion as of the end of 2023. The cost of the positions was 1.6 trillion yen ($10.35 billion) and the 2023 yearend market value of the five stakes was 2.9 trillion yen ($18.76 billion), Berkshire revealed in its annual report. The 93-year-old investment guru has pledged to each company that he will not take his stakes beyond 9.9% unless given specific approval by each company’s board of directors. Since the current stakes are close to his limit, the new bond sale sparked speculation that Buffett could be looking to buy new stocks in Japan. The seven-tranche bond deal offers coupons ranging from 0.974% to 2.498%, according to the filing. Meanwhile, the five Japanese trading companies are all dividend payers, yielding from 1% to more than 3%. Essentially, Buffett is able to pocket the difference between dividends from the investments and the bond coupon payments he pays out. Social Capital’s Chamath Palihapitiya previously expressed his admiration after analyzing his latest bet on Japan , calling Buffett “the greatest of all time” “It’s inspiring to see folks act this intelligently at scale,” said Palihapitiya. Buffett first unveiled these stakes on his 90th birthday in August 2020 after making regular purchases on the Tokyo Stock Exchange, saying he was “confounded” by the opportunity and was attracted to the trading houses’ dividend growth. Buffett even paid a visit to Japan with his designated successor Greg Abel and met with the heads of the Japanese firms last year. He has said he wishes for Berkshire to own the companies forever.