Berkshire Boosts Mitsui Stake, Increases Investment in Japan

Berkshire Hathaway has further increased its stake in Mitsui Corp. to over 10%, continuing its strategic expansion in Japan, where it holds significant positions in five major trading companies. The aggregate investment, valued at $23.5 billion by year-end 2024 from a $13.8 billion cost, is underpinned by attractive valuations, enhanced corporate governance, and favorable yen-denominated debt financing, with expected 2025 dividends of $812 million significantly outweighing $135 million in interest costs. Warren Buffett has indicated that further increases in these holdings are likely, following the companies' relaxation of previous ownership ceilings.

Analysis

Berkshire Hathaway's (BRK.B) strategic expansion in Japan is gaining momentum, as evidenced by its stake in Mitsui Corp. rising to over 10%. This is part of a broader, successful investment across five major Japanese trading companies, initiated in 2019. The financial performance of this strategy is compelling: an initial aggregate cost of $13.8 billion has grown to a market value of $23.5 billion by the end of 2024, representing a significant unrealized gain. The financing structure is particularly astute, utilizing low-cost, yen-denominated bonds to fund the equity positions. This creates a highly positive carry trade, with projected 2025 dividends of $812 million far exceeding the $135 million in annual interest expenses, while also hedging currency exposure. The rationale is supported by attractive valuations in Japan relative to the U.S. and improving corporate governance. However, the outlook for BRK.B's stock presents a more mixed picture. While its year-to-date performance of +7.6% has outpaced its industry, the stock trades at a slight valuation premium with a price-to-book ratio of 1.59 versus the industry average of 1.54. Furthermore, consensus EPS estimates for the full years 2025 and 2026 have seen modest downward revisions of 1.6% and 3.8% respectively, and 2025 EPS is projected to decline year-over-year.

Key Decisions for Investors

• Investors should view Berkshire's Japanese investment strategy as a significant and growing value driver, given the substantial unrealized gains and a highly favorable dividend yield relative to its low financing costs.
• Despite the strength of the Japan portfolio, caution is warranted regarding BRK.B's near-term outlook due to its valuation premium over the industry and recent downward revisions to full-year 2025 and 2026 earnings estimates.
• Monitor future filings for evidence of Berkshire further increasing its stakes in the five Japanese trading houses, as management's stated intent to moderately increase ownership is a key forward-looking catalyst for the stock.