Berkshire Hathaway has reportedly hired banks to arrange its first yen-denominated bond issuance since last November. This move has sparked market speculation regarding the company's investment plans in Japan. According to an email from Mizuho Securities on Thursday, Berkshire has mandated Mizuho Securities and BofA Securities to prepare a potential benchmark-sized yen bond offering. The issuance is expected to be finalized soon, contingent on prevailing market conditions.
This planned bond sale coincides with expectations that the Bank of Japan will implement further interest rate hikes to combat inflation. Swap market data indicates approximately a 70% probability of a BOJ rate hike on April 28, with a hike almost certain before the July policy meeting. Soaring energy prices following conflicts in the Middle East have intensified inflationary pressures, contributing to a decline in bond prices, including Berkshire's debt securities. Data shows that the spread on Berkshire's 15-year yen bond, the longest tranche from its multi-tranche offering totaling 210.1 billion yen ($1.3 billion) priced last November, has widened since its initial issuance.
Earlier this year, Greg Abel assumed leadership of Berkshire Hathaway from his legendary predecessor, Warren Buffett. The company has demonstrated increased ambition for expansion within Asia's second-largest economy. In March, Tokio Marine announced a strategic partnership with Berkshire, with National Indemnity Company, a core reinsurance entity of Berkshire, making a strategic investment representing 2.49% of Tokio Marine Holdings.
Berkshire's strategy in the Japanese market primarily involves funding through yen-denominated bonds, effectively implementing a "borrow yen to buy Japanese stocks" approach. This allows the company to hedge against currency risk while benefiting from Japan's low-interest financing environment. By the end of 2025, Berkshire had raised approximately 210 billion yen through issuing yen-denominated bonds. This move was widely interpreted by the market as potentially preparing Berkshire to increase its stakes in Japan's major trading houses.
Berkshire initiated a series of investments in Japanese trading companies starting in 2019, though specific stake sizes were not disclosed initially. In August 2020, Warren Buffett announced purchases of stakes in Japan's five major trading houses—Mitsubishi Corporation, Marubeni, Mitsui & Co., Itochu Corporation, and Sumitomo Corporation—holding over 5% in each, with an initial total investment of around $6.25 billion, later increased to $13.8 billion. In April 2023, Buffett visited Japan for the first time in 11 years, publicly expressing optimism about Japanese equities and subsequently raising the stakes in each company to 7.4%. Following the release of Buffett's annual shareholder letter last March, Berkshire again announced increased holdings. Recent regulatory filings show Berkshire's stakes in the five major trading houses have now risen to between 8.53% and 9.82%, approaching the 10% upper limit.
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