Berkshire Hathaway first entered Japan’s five major trading houses over six years ago and has consistently expanded its position. The conglomerate now holds more than 10 percent in each of the top five trading companies.
CEO Greg Abel is currently visiting Japan and joined for a business update to discuss his observations in the country.
Abel explained that upon arriving, he visited Tungaloy, one of Berkshire’s operating units in Japan and part of IMC, a company that manufactures tool bits. He spent time at their facilities in Fukushima with the team there.
“We acquired it back in 2008. And over that period of time, really built a business from scratch. It came out of Toshiba, but a relatively small company. We now have a number of significant plants up in Fukushima,” Abel said.
Berkshire employs approximately 1,500 people in Japan. The company has just under $240 million in domestic sales and an additional $400 million internationally, demonstrating significant growth potential.
Abel noted that Berkshire initially acquired just over 5 percent in each trading house, announcing the investment on Warren Buffett’s 90th birthday six years ago. At that time, they communicated it was a long-term holding intended to build relationships with each company.
“We highlighted and requested their approval that we could go over 10 percent because up to that point, we’d always highlighted we would stay below 10 and only exceed it if the five trading companies agreed,” Abel explained. “Upon receiving their approval, we went above 10 percent. It’s really a long-term investment that we intend to hold for many decades.”
Regarding Tokio Marine, Abel highlighted a strategic partnership where Berkshire holds a 2.5 percent quota share and interest in the company. He emphasized the partnership is broad and either party can bring ideas to the table, though there’s no obligation to act on them.
On the topic of yen-denominated bonds, Abel noted Berkshire has approximately $15 billion worth of Japanese yen debt with a remaining maturity of just over five years. The company still sees a significant carry advantage and would continue issuing debt as appropriate.
“We do see the underlying companies’ earnings performance growing. We do see an increase in dividends likely over the coming years and continued share repurchases,” Abel stated.
When discussing Warren Buffett, who recently turned 96, Abel described their working relationship as one of regular dialogue, often daily, even while traveling.
Regarding Alphabet, Abel explained Berkshire’s interest stemmed from recognizing AI’s significant impact on American businesses. “We have a lot of visibility from within our companies as to how we’re using AI, what type of benefits it’s delivering. And we saw Google as a significant player,” he said.
On data center development and energy constraints, Abel emphasized Berkshire Hathaway Energy’s cautious approach. The company focuses on ensuring no impact to customer rates, minimal water usage, and community acceptance before expanding data center infrastructure.
“We’ve really operated to some pretty basic principles right from the get-go. We highlighted we are interested in serving these hyperscalers if there was no impact to the rates of our other customers, and in fact, we’ve pretty much taken the approach there has to be a net benefit to our customers,” Abel explained.
Regarding housing investments, Abel acknowledged the Taylor Morrison acquisition for $6.8 billion and stake increases in Lennar reflect Berkshire’s long-term view on housing in North America.
“We didn’t see any type of immediate recovery or any type of hockey stick there. We did see it, from Berkshire’s perspective, that it was going to be a bumpy road for a while,” Abel noted. “But we do see it as an industry that we definitely want to be invested in, and we’re invested in, for the long-term.”
On the broader economy, Abel described conditions as vibrant in Japan with strong results from trading houses, while Berkshire’s businesses through the second quarter remain very strong. However, he acknowledged some consumers are still feeling economic pressure.
“The fundamentals around the economy, at least from what we’re seeing through the second quarter, remain very, very strong,” Abel concluded.
Also Read
- Delta Air Lines to Match Federal $1,000 ‘Trump Account’ Seed for Employees’ Children
- Trump negotiators Witkoff, Kushner arrive in Moscow as US pushes for end to Russia-Ukraine war
- The New Multipolar Order: Strategic Flexibility at the Cost of Security Guarantees
- NEC cancels quantum computer initiative in Japan