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$Berkshire Hathaway(BRK.B)$ $Berkshire Hathaway(BRK.A)$ , the company owned by Warren Buffett, plans to sell yen-denominated bonds in global markets, sparking speculation that the billionaire is considering increasing investments in Japan.

An insider revealed that Berkshire has tasked banks with working on a potential standard SEC registered bond issuance.

If realized, this would mark the 8th issuance of yen-denominated bonds by Berkshire Hathaway since November 2023. As of November 2023, including five issuances with varying maturities, bonds worth 122 billion yen have been issued.

Welcome to review my article about Japan investments:

• Warren Buffett Brought Japan Back, How Long Will It Last in 2024?

• BOJ Ends Negative Interest Rates, Don't Miss the Japan ETFs？

Today, I would like to discuss the reasons and advantages behind Warren Buffett's decision to issue Yen bonds through his company, $Berkshire Hathaway(BRK.A)$ $Berkshire Hathaway(BRK.B)$ . And also my thinking on invests follow the company.

1. Key benefits of issuing Yen bonds

Based on several publicly available readings, the key points are as follows:

Leveraging Japan's low-interest-rate environment: Japan has long maintained a low-interest-rate policy, which makes the cost of issuing Yen bonds relatively low. According to reports, the coupon rates on the Yen bonds previously issued by Buffett were even higher than those of some large Japanese corporations, demonstrating the high demand from investors for Berkshire Hathaway bonds and the appeal of Japan's low-interest-rate environment.

Reducing exchange rate risk: By issuing Yen bonds, $Berkshire Hathaway(BRK.B)$ can mitigate the risks of investment gains and losses due to exchange rate fluctuations. Although the stocks of the five major trading companies in Japan held by Buffett have significantly increased in value, the returns denominated in US dollars could be affected if the Yen appreciates against the Dollar. Therefore, issuing Yen bonds helps to hedge against this currency risk.

Diversifying sources of funding: Buffett's issuance of bonds in different currencies allows Berkshire Hathaway to diversify its funding sources. Public information indicates that the scale of Berkshire's Yen-denominated notes has increased by 50% year-on-year, and the interest paid is significantly lower than other categories, highlighting the importance of diversifying funding sources.

General corporate use and refinancing: In its application documents, $Berkshire Hathaway(BRK.B)$ stated that it expects the net proceeds from this issuance to be used for general corporate purposes, including refinancing the preferred notes of 2023. This indicates that the bond issuance is also aimed at meeting the company's liquidity needs and financial planning.

Increasing investment in the Japanese market: The market speculates that Buffett's issuance of Yen bonds may further increase investment in the Japanese stock market. This move has sparked market speculation that he may increase his holdings in the shares of Japan's "Big Five Trading Houses," which aligns with Buffett's consistent investment style of investing in companies with strong and growing performance, as well as increasing dividend and buyback efforts.

In summary, the benefits of Warren Buffett issuing Yen bonds include leveraging the low-interest-rate environment to reduce financing costs, mitigating exchange rate risks, diversifying funding sources, meeting the company's capital needs, and potentially providing financial support for further investment activities. These strategies reflect Buffett's long-term and prudent investment philosophy.

2. Is Buffett's company going to invest more in Japanese stocks?

One of the market's focal points is the potential increase in Japan's holdings. Many investors believe that if Buffett continues to expand his investment in the Japanese stock market, the "Big Five Trading Houses" of Japan (Itochu, Marubeni, Mitsubishi Corporation, Mitsui & Co., and Sumitomo Corporation) are likely to be his top choices.

The performance of these trading houses continues to strengthen, and their dividend payouts and repurchase efforts are continuously increasing, which aligns with Buffett's consistent investment style.

For instance, Itochu announced an increase in its total dividend payout ratio to 50% for the fiscal year and set a higher target for consolidated net profit. Both Marubeni and Mitsubishi Corporation have also adjusted their annual dividend forecasts and stock repurchase plans.

In previous shareholder letters, Buffett mentioned that diversified businesses, high dividends, strong free cash flow, and prudent issuance of new shares are the reasons he favors the "Big Five Trading Houses." Since initially investing in these trading houses in 2020, Berkshire Hathaway's ownership stake has increased to over 8.5%, with plans to hold these investments for the long term.

3. Strategy: Bullish on Japan ETFs and $Berkshire Hathaway(BRK.B)$ ?

Monthly chart

Considering that Berkshire Hathaway has achieved an annualized return of 19.8% over 57 years, significantly outperforming the S&P 500's annualized return of 9.9% during the same period. Additionally, from 1965 to 2020, Berkshire Hathaway's compounded annual growth rate reached 20%, which is one of the reasons Warren Buffett is revered as the "Oracle of Omaha."

Given Berkshire's solid financial performance, market position, management team, and value investing perspective, I believe $Berkshire Hathaway(BRK.B)$ is an excellent long-term investment target for the average investor. A sell put strategy is a great way to earn a steady premium by betting on Berkshire's future.

If you remain optimistic about Japan, considering the low exchange rate and the potential appreciation of the yen, Japan ETFs are still worth considering. See BOJ Ends Negative Interest Rates, Don't Miss the Japan ETFs?

Investors should consider market risks, personal investment objectives, and risk tolerance when adopting a bullish strategy and seek professional financial advice when necessary.

[Please note that the above information is for reference only and does not constitute investment advice.]