Berkshire Hathaway Reveals 5% Stakes in Japan’s Top Trading Firms

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Berkshire Hathaway Reveals 5% Stakes in Japan’s Top Trading Firms

Key Takeaways

  • Berkshire Hathaway acquires 5% shares in five Japanese trading behemoths.
  • Holdings purchased over a year ago and now worth more than $6 billion
  • Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo are the five companies.
  • The stakes may be raised to a maximum of 9.9% each.

Berkshire Hathaway, Warren Buffett’s conglomerate, has bought little more than 5% of the outstanding shares in five of Japan’s biggest trading businesses. Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo are the corporations, and the interests were acquired over a year by insurance subsidiary National Indemnity Company via regular acquisitions on the Tokyo Stock Exchange. The news was made in a press statement a day after the famous investor turned 90.

“I am thrilled to have Berkshire Hathaway participate in Japan’s future and the five firms we have picked for investment,” the Oracle of Omaha stated. “The five largest trade businesses have several joint ventures across the globe and are expected to have more. I hope that there will be prospects for mutual gain in the future.”

Berkshire Hathaway aims to keep its Japanese interests for the long term and, depending on pricing, may raise its stakes in any of the companies to a maximum of 9.9%. Today, the stakes are worth more than $6 billion. Buffett has vowed that no acquisitions would be made over that limit unless the board of directors gets special permission.

In Japan, extremely large general trading enterprises are called as “sogo shoshas,” and Buffett has staked in five of the seven now in operation. “These trading firms create high cash flow, pay out large dividends, and have operations that are difficult to imitate,” Thanh Ha Pham, an analyst at Jefferies, told Bloomberg. The notion of enormously diverse, massive corporations with extensive global reaches and tens of thousands of goods and services handled evolved in Japan in the nineteenth century to undertake raw material imports to a nation with little natural resources. It was revitalized after WWII, and such enterprises played a significant part in its climb to economic powerhouse status.

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Their influence has waned since the 1980s, but it is still strong. According to the Japan Foreign Trade Council, the seven sogo shoshas now have over 5,000 subsidiary and associate firms and offices in 210 cities across the world. According to a Marubeni estimate, their sales represented around 15% of Japan’s GDP in fiscal 2016, and they accounted for approximately one-third of Japan’s imports and approximately 18% of its exports in fiscal 2015.

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