The Zacks Analyst Blog Highlights FJP, EWJV, DFJ, SCJ, FLJH and SPY

Berkshire Hathaway has increased its holdings in Japanese trading houses, raising its stake in Mitsubishi Corp. to 10.23% and Mitsui & Co. to over 9.82%, signaling continued confidence and a relaxation of previous stake limits. This move spurred rallies in the sector and underscores the broader attractiveness of the Japanese market, characterized by robust Q2 2025 GDP growth and attractively valued equities, with Japan-focused ETFs recently outperforming the S&P 500.

Analysis

Berkshire Hathaway's increased investment in Japanese trading conglomerates, specifically boosting its stake in Mitsubishi Corp. to 10.23% and Mitsui & Co. to over 9.82%, serves as a significant institutional endorsement for the Japanese equity market. This move, which follows a relaxation of Berkshire's self-imposed 10% ownership cap, has catalyzed a rally in the sector and highlights a broader trend of Japanese firms becoming more proactive in returning value to shareholders through measures like buybacks. The investment thesis is further supported by a favorable macroeconomic backdrop, with Japan's Q2 2025 GDP growing 0.3% sequentially—beating expectations for the fifth consecutive quarter of expansion—and continued low interest rates despite recent central bank hikes. Crucially, Japanese equities remain attractively valued relative to their U.S. counterparts; associated ETFs like FJP, EWJV, and DFJ carry P/E ratios in the 14-17X range, compared to approximately 33.75X for the S&P 500, underpinning the recent outperformance of these Japan-focused funds against the SPY.

Key Decisions for Investors

• Investors should consider initiating or increasing exposure to Japanese equities, potentially through the ETFs mentioned (FJP, EWJV, DFJ, SCJ), to capitalize on the combined tailwinds of strong institutional confidence, attractive relative valuations, and positive economic momentum.
• A focus on value-oriented and shareholder-return focused strategies is warranted, as Japanese trading houses are increasingly prioritizing capital returns, a trend validated by Berkshire Hathaway's continued investment.
• Monitor Japan's monetary policy closely, as any acceleration in rate hikes beyond the current modest pace could affect equity valuations and currency dynamics, representing a key risk to the current bullish thesis.
• Given the recent outperformance of Japan ETFs versus the S&P 500, investors could view this as a strategic portfolio diversification away from more expensive U.S. markets.