Classics never go out of style! Berkshire plans to increase its stakes in Japan's five major trading houses, "strong cash flow + dividends + buybacks" firmly locking in long-term capital.

The Japanese trading house positions established during the Buffett era are becoming a long-term allocation for Berkshire Hathaway, the U.S. insurance and investment giant, that will span management succession, rather than a phased trade awaiting an exit. Berkshire began buying the five major trading houses in July 2019 and first publicly disclosed the holdings in August 2020, with stakes in each company slightly above 5%; it subsequently increased its holdings gradually, and the initially agreed ownership caps were also moderately relaxed after obtaining consent from the investee companies. Masahiro Okafuji, chairman of Itochu Corp, one of Japan's five major trading houses, said on Wednesday that Berkshire is considering increasing its stakes in Japanese general trading companies. Berkshire Hathaway, long helmed by the "Oracle of Omaha" Buffett, has firmly held roughly 10% stakes in each of these companies for more than the past six years. Buffett, who was at the helm of Berkshire at the time, believed that the five major trading houses had diversified holding structures similar to Berkshire's, that the initial allocations were cheaply valued, and that they also possessed prudent capital allocation, sustained dividends, reasonable buybacks and relatively restrained executive compensation systems. Abel, who formally succeeded Berkshire veteran Warren Buffett as chief executive officer in January this year, said in an interview in early September that the group plans to hold its stakes in Japan's five major trading houses for decades and may even increase the size of its holdings. Itochu's announcement in March this year also confirmed that Berkshire, through additional purchases, raised its voting rights ratio to 10.07% and is considering further increases in the future. The core signal released by Masahiro Okafuji this time is that the willingness to hold for the long term has not weakened because of the leadership change, that the ownership ratio may still be further increased, and he emphasized that Berkshire will not excessively interfere in business operations even if it holds a higher stake. Itochu says Berkshire may increase its stakes in Japanese trading houses According to local Japanese media reports, the core head of the industry lobbying group representing Japanese trading companies said that Berkshire Hathaway is considering increasing its stakes in Japanese trading houses. Masahiro Okafuji, chairman of the Japan Foreign Trade Council, said that after meeting with Berkshire CEO Greg Abel earlier this month, he believed the U.S. investment company "intends to hold the shares of these trading houses for the long term and is even considering increasing its holdings." Berkshire's shareholding ratios in Mitsubishi Corp, Sumitomo Corp, Mitsui & Co, Marubeni and Itochu all exceed 10%. Okafuji also serves as chairman of Itochu. Abel met with the heads of these companies in Japan earlier this month and said in an interview with Nikkei that Berkshire may raise its shareholding ratios in these companies. The U.S. company, previously led by legendary investor Warren Buffett, first invested in Japanese trading houses more than six years ago and has since gradually increased its holdings. The company also regularly issues yen-denominated bonds. Okafuji said at the Japan Foreign Trade Council's regular press conference on Wednesday that Berkshire is satisfied with the "economic moats" possessed by Japanese trading houses, including extensive global networks and highly sophisticated capital allocation capabilities, which constitute significant barriers to entry. This is also one of the reasons Berkshire Hathaway invested in these companies. "Berkshire will not nitpick the business operations of the trading houses," he said in the interview. "Although Berkshire currently holds about 10% of these trading houses, the company has said that even if its shareholding ratio rises to 15%, it will not be dictatorial. As a shareholder, this makes Berkshire extremely valuable to us." Okafuji said that although cooperation between Berkshire and Japanese trading houses is often discussed, the U.S. company is also a shareholder in these enterprises, so if the two sides seek larger-scale business cooperation, conflicts of interest could arise. The "compound interest relay" of the five major trading houses a change of leadership does not change long-term investment principles The long-term share price performance of the five major trading houses has significantly outperformed the broader Japanese market. Using a unified basis of yen-denominated share price gains excluding dividends from the end of 2020 to the end of 2025, and calculating by multiplying the annual gains and losses disclosed by market data platforms, Mitsubishi Corp and Mitsui & Co rose by about 323% and 391% cumulatively, respectively; Sumitomo Corp, Marubeni and Itochu rose by about 296%, 534% and 233%, respectively. By comparison, the Nikkei 225 rose by about 84% cumulatively over the same period, and the cumulative gains of all five companies were clearly ahead, exceeding it by about 150 to 451 percentage points. The above comparison is historical performance for this complete five-year period, not a rolling five-year return as of now, nor Berkshire's actual investment return after phased purchases, receipt of dividends and conversion into U.S. dollars. Berkshire under Buffett's stewardship favored the five major trading houses first because it valued "global operating assets + capital allocation capability," not merely trading operations or commodity price exposure. In his 2024 annual shareholder letter, Buffett explicitly pointed out that these companies hold a wide range of business interests and operate in ways similar to Berkshire; what initially attracted him was the contrast between excellent financial records and low share prices, and he later came to appreciate even more their management, capital deployment methods and attitude toward shareholders, including moderately raising dividends, repurchasing shares at reasonable times and relatively restrained executive compensation. Berkshire's willingness to continue holding for the long term, and even consider increasing its stakes, after the sharp rise in the share prices of the five major trading houses reflects its long-term confidence in their ability to continue generating cash flow, allocate capital effectively and reward shareholders through dividends and buybacks. The "moat" of global networks and capital allocation emphasized by Okafuji can thus be understood as having two important layers of value: one is the long-accumulated business relationships and operating capabilities that make it difficult for competitors to quickly replicate their business foundation; the other is the ability of management to allocate capital across different businesses and choose among reinvestment, buybacks and dividends. Reasoning from the allocation mechanism, what truly deserves a long-term valuation is not the label of "business diversification," but whether the diversified businesses can continue to generate cash flow and whether retained funds can continue to create strong investment returns above the cost of capital. The second layer of advantage is matching yen financing with yen equity assets, allowing long-term operating returns and the financing structure to work in concert. Berkshire's 2025 annual report shows that the cumulative investment cost of its holdings in the five major trading houses was $15.382 billion, with a year-end market value of $35.368 billion, and it received $862 million in dividends that year; its borrowing scale in Japan roughly corresponds to the yen cost of these investments, with an average financing cost of 1.2% and a weighted average remaining maturity of about 5.75 years. Buffett previously made clear that the yen borrowings use fixed rates, with the aim of being as close to currency-neutral as possible rather than predicting the yen's direction. Reasoning from the financial structure, this arrangement can reduce some currency mismatch risk and support long-term holding with lower financing costs.