Japanese Market Turbulence Yields An Unexpected Winner: Warren Buffett

Japan is weathering an economic hurricane. Japanese government bonds are suffering a historic sell-off and the yen is sliding fast as investors panic over Prime Minister Sanae Takaichi’s fiscal stimulus and proposed tax cuts. In the last 10 days, yields on the 40-year Japanese government bonds have eclipsed 4%, a figure not seen for long-dated JGB securities in three decades. For policymakers in Tokyo, a crisis is brewing.

But for Berkshire Hathaway, the chaos has been good for business. The Omaha, NE-based conglomerate has big equity stakes in Japan’s five large trading houses, known as the sogo shosha (or “general trading companies”): Mitsubishi, Mitsui, Itochu, Marubeni and Sumitomo. Shares in those and other Japanese corporations are on a tear as Japan’s central bank raises rates to combat inflation after years of deflation. Over the past three months, Marubeni has jumped more than 30%, while Sumitomo is up over 40%. Amid the past week’s volatility, all five stocks gained between 3% and 11%. Japan’s Nikkei 225 stock index is down about 3% over the last five trading days, butup 33% in the last six months, compared to the S&P 500 index’s 8% return.

Berkshire first invested in the five trading companies in July 2019, spending $6.5 billion in total to acquire 5% stakes in each firm. Between 2023 and last year, it spent another $7.3 billion on the five companies, boosting the size of its stakes. That $13.8 billion cash expenditure is now worth around $38 billion—a $24 billion gain. The sogo shosha are cash cows, too: Berkshire said in its shareholder letter last year that it expected to collect $812 million in dividend income from its Japanese investment in 2025. Those yields are more than enough to cover the interest cost of Berkshire’s yen-denominated debt ($135 million last year), which it took out to finance the investments. The investment epitomizes Buffett’s smart buying: the yen denominated debt he borrowed to acquire his stakes costs less than 1% per year, while the trading houses were paying dividends of about 4% per year.

The performance of Buffett’s sogo shosha investments offers a bright spot for Berkshire as it navigates a period of transition following the planned retirement of its CEO, founder and largest individual shareholder Warren Buffett at the end of December. (The 95-year-old, who remains chairman, is worth $143.6 billion). Berkshire’s stock returned 11% in 2025, compared to the S&P 500’s 18% return, as investors questioned the conglomerate’s future without its talismanic founder and his stock-picking genius. Over the last few years, Berkshire—which has large positions in U.S. banks, consumer staples and some $380 billion in U.S. dollars—has largely missed out on the artificial intelligence boom, except for positions in stocks like Apple and Amazon.

Ultimately, Berkshire’s Japanese investments represent only about 4% of the conglomerate’s $1 trillion market capitalization. John Boyar, an investor in Berkshire who runs the research boutique Boyar Value Group, says he’s more preoccupied with the leadership transition to new-CEO Greg Abel than he is about any one individual investment’s success or failure. “The real concern is what is the reign of Greg Abel going to do to the stock and to the Berkshire culture,” says Boyar, who remains bullish on the stock.

In recent weeks, Japanese investors have viewed the sogo shosha as safe harbours amid the bond market dislocation. While stubborn inflation hits consumers and forces the government’s hand to raise rates, the giant trading houses own hard assets—energy, metals, food—which means they can withstand rising commodity prices. The Japanese companies, which themselves command a combined market value of $440 billion, also benefit from the weakening yen, since they earn billions in U.S. dollars while reporting earnings in yen; the currency conversion alone juices profits. “What’s been holding [Japanese] stocks back was deflation, that asset prices weren’t going up,” says James Bianco, a macroeconomic strategist. “Now they’ve got that. They don’t have that headwind.”

Once a Japan skeptic, Buffett came to love the sogo shosha once he realized how much of a bargain they were, selling below their net asset values during the height of the pandemic. “We simply looked at their financial records and were amazed at the low prices of their stocks,” Buffett recalled in last year’s shareholder letter. He also saw a kindred spirit in them: The trading houses—with their sprawling, diversified businesses spanning commodities, logistics, manufacturing and finance—echo Berkshire’s own conglomerate model.

Berkshire’s trade is not without risk. If Japan’s rate path steepens, the yen’s direction could shift, taking some of the currency-translation juice out of reported profits. And the trading houses are still exposed to the real economy and commodity price swings.

Ultimately, says Boyar, investors in Berkshire will view the successful Japan trade through the lens of what’s to come. Says Boyar, “Investors are more focused on whether opportunities like that will appear in the future, based on whether people will still want to do business with Berkshire.”