Berkshire Increases Holdings in Five Japanese Trading Companies, Each Exceeding 10%; Greg Abel Continues to Accumulate After Buffett Steps Down as CEO
Berkshire Hathaway has been buying into Japan's five major trading companies since 2019, and by the first half of this year, it has increased its holdings in Itochu, Mitsubishi Corporation, Mitsui & Co., Marubeni, and Sumitomo Corporation to over 10%. After Buffett stepped down as CEO, Greg Abel continues to increase holdings.
The total purchase cost by the end of 2025 is approximately $15.4 billion, with a market value of about $35.4 billion, resulting in an unrealized gain of nearly $20 billion, mainly from stock prices, not including received dividends. The original agreement was to keep holdings below approximately 9.9%, but after nearing this limit, the five companies agreed to moderately relax this restriction. Mitsubishi once disclosed a holding of about 10.8%, with a cost of about $4.2 billion and a market value of about $9.2 billion.
The funding structure involves borrowing yen to buy yen-denominated assets. Matching the cost is approximately $14.9 billion in yen-denominated bonds, with an early average interest rate of about 1.2%. Dividends are expected to be about $812 million in 2025, with interest around $135 million, leaving a difference of about $677 million, which can cover interest and leave cash without needing to sell shares. In April, approximately 272.3 billion yen in senior notes were reissued. The new issuance rate has already surpassed the initial stage.
The trading companies profit globally: Mitsui and Mitsubishi are involved in mines in Australia and South America, as well as U.S. liquefied natural gas; Itochu is more consumer-focused, while Marubeni and Sumitomo cover food, electricity, and infrastructure. Slow domestic growth in Japan only affects some businesses. The valuation was low in 2019, and since then, resource prices and ongoing dividends and buybacks have raised earnings per share. When the yen depreciates, stocks and yen liabilities converted to dollars shrink simultaneously, with currency exchange partially hedged.
The buyer is Omaha funds looking to lock in global cash flows, while the sellers are trading companies agreeing to relax the holding limit. Funds are flowing from the yen bond market to Tokyo stocks. Benefiting are the interest rate spreads from low-interest liabilities paired with high dividends; pressured are the valuation, which has already risen, and the spread space after new bond costs have risen to about 2.4%. This is a long-term accumulation, not a short-term speculative liquidation.
Source: Public Information
ABAB AI Insight
Berkshire is engaging in balance sheet arbitrage in Japan: using cheap local debt to buy local undervalued and stable dividend-paying industry holding companies. The trading companies do not mirror Japan's GDP; they are a global mix of mines, liquefied natural gas, food, and electricity. After Buffett's retirement, Abel continues to push all five companies over 10%, effectively writing "comparable core U.S. holdings" into the shareholder letter, rather than treating Japan as a satellite warehouse. Relaxing the limit allows a long-term shareholder to sit in the front row.
The capital path involves issuing yen bonds, collecting dividends to pay interest, and using the remainder to buy more. The motivation is to substitute acquisitions with buybacks and dividend discipline after governance reforms in Japan when sufficient cheap whole companies cannot be found in U.S. cash piles. Currency exchange is hedged by the same currency assets and liabilities, with the real risk being the trading companies' resource cycles and the normalization of Japanese interest rates. The new issuance at 2.4% compared to the initial 1.2% means the interest spread has shifted from "very wide" to "still usable."
This is similar to Li Ka-shing using local debt to buy local ports and also similar to European insurance float buying domestic utilities. Comprehensive trading companies are transitioning from discount recovery to capital allocation priced by international shareholders. Whoever can use yen bonds at just over 1% to capture global mining dividends will not need Japan's economy to grow rapidly again.
The essence is capital concentration. The mechanism pairs low-cost liabilities with undervalued industry holding equity, allowing dividends to service interest first, with stock price increases becoming an addition. Japan's thirty years of low growth determines the discount, global resources determine profits, and yen bonds determine leveraged currency. When these three factors overlap on the same group of stocks, nearly $20 billion in unrealized gains can emerge.
ABAB News · Cognitive Laws
Borrow local money to buy locally undervalued global businesses
Dividends pay interest first, stock price increases are an addition
Economic growth is not necessary as long as assets earn overseas