Buffett Boosts Stakes in Japan: ETFs to Play

Berkshire Hathaway Inc. has increased its holdings in Japanese trading houses, raising its voting rights stake in Mitsubishi Corp. to 10.23% from 9.74% and boosting its position in Mitsui & Co. This expansion, which sent shares across the sector higher on August 28, 2025, signals Warren Buffett's continued confidence in Japan's 'shoshas' and follows a relaxation of Berkshire's self-imposed 10% stake cap. The move highlights a broader positive sentiment for Japanese equities, supported by robust Q2 2025 GDP growth of 0.3% and attractive valuations relative to U.S. stocks, with Japanese ETFs outperforming the S&P 500.

Analysis

Berkshire Hathaway's increased investment in Japan's major trading houses, lifting its stake in Mitsubishi Corp. to 10.23% and increasing its holding in Mitsui & Co., serves as a significant validation for the sector and the broader Japanese market. This move, which extends a strategy initiated in 2020, is particularly noteworthy as it follows a relaxation of Berkshire's self-imposed sub-10% ownership cap, signaling deepened conviction. The market reaction was immediately positive, driving shares of these conglomerates, or 'shoshas', higher. This investor confidence is underpinned by improving corporate governance, with an analyst noting these firms are becoming more proactive in returning value to shareholders via buybacks. The bullish sentiment is further supported by a favorable macroeconomic environment, evidenced by Japan's Q2 2025 GDP growth of 0.3%, which surpassed expectations and marked the fifth consecutive quarterly expansion. Despite recent central bank rate hikes, borrowing costs remain low. Crucially, Japanese equities present a compelling valuation case relative to the U.S.; ETFs like the iShares MSCI Japan Value ETF (EWJV) trade at a P/E of 14.37X, a steep discount to the S&P 500's P/E of approximately 33.75X, a gap that has contributed to their recent outperformance against the SPDR S&P 500 ETF (SPY).

Key Decisions for Investors

• Consider increasing exposure to Japanese equities, particularly the large trading conglomerates like Mitsubishi (MSBHF) and Mitsui (MITSY), to align with the strong institutional signal from Berkshire Hathaway.
• For diversified exposure, evaluate Japanese ETFs that exhibit attractive valuations and recent outperformance, such as the iShares MSCI Japan Value ETF (EWJV), which has a P/E of 14.37X.
• Investors may explore a relative value strategy, favoring undervalued Japanese stocks over more expensive U.S. equities, given the compelling combination of Japan's positive GDP growth and lower market P/E ratios compared to the S&P 500.
• Monitor announcements from the Japanese trading houses regarding capital return policies, as increased share buybacks or dividends could serve as further catalysts for share price appreciation.