Precise positioning for interest rate hikes! Berkshire Hathaway (BRK.A.US) plans to issue multi-term Japanese yen bonds, with pricing scheduled for as early as next week.

According to informed sources, Berkshire Hathaway (BRK.A.US) has begun to gauge investors' interest in a potential multi-term yen bond issuance. This potential bond issuance comes just about a week after their disclosure of plans to invest approximately 300 billion yen (about $1.8 billion) in Tokyo Marine Holdings. Sources say Berkshire plans to issue bonds covering 7 terms, ranging from 3 years to 30 years, and may complete pricing as early as April 10. The day before, it was reported that Berkshire had appointed SMBC Nikko Securities and BofA Securities to prepare for a potential benchmark-sized yen bond issuance. Earlier this year, Greg Abel took the helm from his legendary predecessor Warren Buffett. The company's expansion in the second largest Asian economy has become more ambitious. In March, Tokyo Marine Holdings announced a strategic partnership with Berkshire, where Berkshire's core reinsurance entity National Indemnity will make a 2.49% strategic investment in Tokyo Marine Holdings. Berkshire's strategy in the Japanese market primarily involves yen bond financing, implementing a "buy Japanese stocks with yen" strategy. By issuing yen bonds, Berkshire both avoids exchange rate risks and benefits from Japan's low interest rate financing environment. By the end of 2025, Berkshire had raised approximately 210 billion yen through the issuance of yen-denominated bonds. At that time, this move was seen by the market as Berkshire potentially preparing ammunition to increase its stakes in Japan's five major trading companies. In 2019, Berkshire began a series of investments in Japanese trading companies, but did not disclose specific ownership ratios at that time. In August 2020, Buffett announced that he had purchased shares in Japan's five major trading companies (Mitsubishi Corporation, Marubeni, Mitsui & Co., Itochu Corporation, and Sumitomo Corporation), holding over 5% of each company's shares, with an initial total investment of about $6.25 billion gradually increasing to $13.8 billion. In April 2023, Buffett visited Japan after 11 years, publicly expressing optimism about the Japanese stock market, and subsequently increasing his stakes in each company to 7.4%. In March of last year, after Buffett's annual shareholder letter was released, Berkshire announced once again that it had increased its stakes in these trading companieslatest regulatory filings show that Berkshire's ownership stakes in the five trading companies have increased to 8.53%-9.82%, close to the 10% limit. However, with uncertainty surrounding the Middle East conflict causing fluctuations in Japanese government bond yields, investors are demanding higher risk premiums. On Friday, the spread between 10-year municipal bonds and Japanese government bonds widened for the first time in 11 months. In this context, corporate issuers have become more cautious. As of April 3, only 12 companies have issued bonds, a drop of nearly 60% compared to the same period last year. Berkshire's planned bond issuance comes as the Bank of Japan is expected to further raise interest rates to curb inflation. The swaps market indicates that the market expects a 70% probability of the Bank of Japan raising rates on April 28 and is almost certain to have completed a rate hike before the policy meeting in July.