Berkshire Endorses Japanese Trading Houses, Could Hold Them 'Forever'

Berkshire Hathaway, the investment powerhouse led by Warren Buffett and Greg Abel, has quietly built a $23.5 billion stake in five Japanese trading houses—Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo—since 2019. These investments, initially dismissed as a contrarian bet, now represent a cornerstone of Berkshire’s long-term strategy, with Buffett declaring in 2025, "In the next 50 years, we won’t give a thought to selling those." The move underscores a profound faith in the undervalued, globally diversified conglomerates known as sogo shosha, which operate as linchpins of Japan’s economy.

The Case for Permanent Holdings

Buffett’s endorsement hinges on three pillars: valuation, yield, and structural alignment with Berkshire’s model.

1. Compelling Valuations

The Japanese trading houses trade at fractions of their global peers’ multiples. As of early 2025:
- Mitsui (MITSY) had a P/E of 8.6x and a book value multiple of 1.1x.
- Mitsubishi (MUFG) traded at 10.3x earnings, while Sumitomo (SMFG) was priced at 0.9x book value.
- The S&P 500, by contrast, traded at 23x earnings and 4.8x book value.

2. High Yields and Shareholder-Friendly Policies

The trading houses prioritize dividends and buybacks, a stark contrast to many U.S. firms. As of 2025:
- Mitsubishi offered a 7.84% total yield (dividends + buybacks).
- Mitsui and Itochu provided 7.25% and 4.32% yields, respectively.

These payouts, combined with low borrowing costs, create a "carry trade" advantage. Berkshire’s yen-denominated bonds, issued at 0.5% interest rates, cost just $135 million annually, while dividends from the holdings totaled $812 million in 2024.

3. Structural Synergy with Berkshire’s Model

The sogo shosha operate as global conglomerates, much like Berkshire itself, with interests spanning commodities, shipping, energy, and textiles. Buffett praised their prudent capital allocation and restrained executive compensation, noting, "They don’t overpay CEOs, and they don’t overpay themselves."

Navigating Risks with a Margin of Safety

Despite their allure, the trading houses face risks. U.S.-Japan trade tensions, including 25% tariffs on cars, and geopolitical uncertainties could disrupt their supply chains. However, their global diversification—with operations in over 100 countries—buffers against regional downturns.

The Financial Payoff

Since 2019, Berkshire’s investments have delivered exceptional returns. The $13.8 billion initial cost basis grew to $23.5 billion by 2024, a 70% gain. The trading houses’ ADRs rose 16.9% in 2025, outperforming the Morningstar Japan Index by over 10 percentage points.

A Forever Play?

Buffett’s "forever" pledge reflects more than sentiment. By increasing ownership stakes to 8.5–9.8% (with plans to go higher) and issuing $2.5 billion in yen bonds since 2024, Berkshire has locked in its position. Greg Abel’s emphasis on "50 years or forever" underscores a strategic bet on Japan’s corporate governance reforms and the undervalued nature of its equity markets.

Conclusion

Berkshire’s endorsement of Japan’s trading houses is a masterclass in long-term value investing. The firms’ low valuations, generous yields, and global operational resilience align perfectly with Buffett’s criteria: "It’s better to be approximately right than precisely wrong."

With $812 million in annual dividends, $135 million in hedged interest costs, and a $23.5 billion portfolio growing at double-digit rates, Berkshire’s patience is paying off. Even as trade wars loom, the trading houses’ diversified revenues and shareholder-friendly policies provide a margin of safety unmatched in today’s volatile markets.

As Buffett once said, "Risk comes from not knowing what you’re doing." In Japan’s trading houses, Berkshire knows exactly what it’s doing—and plans to stick around for decades.