Why Warren Buffett’s Berkshire Hathaway Still Likes Japan

Warren Buffett’s Berkshire Hathaway has been building stakes in Japan’s big trading houses for years. (Getty Images)

Berkshire Hathaway , the company run by billionaire investor Warren Buffett, has just increased its holdings of two big Japanese companies. It’s a bet on two things—Japan’s economy thriving, and the corporate culture becoming more investor friendly.

Buffett has spent the last five years building stakes in Japan’s trading houses, called sogo shosha. These are large conglomerates with interests across the economy–everything from energy to food to aerospace and logistics.

On Thursday Mitsubishi Corp . said Berkshire had lifted its holding to just above 10% of voting rights in the company. Mitsui separately said Berkshire had invested more. The U.S. firm also holds stakes in the other three big trading houses– Itochu , Marubeni , and Sumitomo.

Berkshire’s move comes as Japan’s Nikkei stock index has risen more than 10% over the past three months. The market has been performing well since the start of 2023, when it became clear that the country was likely to be escaping decades of deflation, and its demographics were likely to start shifting in the economy’s favor.

The rally has continued despite President Donald Trump’s imposition of tariffs and the potential political instability of the dominant party losing a majority in parliament’s upper house. Buffett’s exposure suggests that executives think the expansion still has legs, and buying into the trading houses reflects the expectation that when Japan does well, so do they.

But there’s another reason for Buffett to like the stocks, according to Morningstar analyst Michael Makdad. They’re working to increase dividends and buybacks, and they’re undervalued by more than 20%, he wrote in research published last month.

While Berkshire is mostly staying on the sidelines of the U.S. market these days–it finished the second quarter with $344 billion in cash–it’s clear that the Oracle of Omaha still likes a good bargain when he sees one.

Write to Brian Swint at brian.swint@barrons.com