Japan’s Buffett-Backed Trading Houses Navigate Tariff Headwinds with Resilience
24min read The Japanese trading houses—ITOCHU, Marubeni, Mitsubishi, Mitsui, and Sumitomo—have long been cornerstones of global commerce. Now, as U.S. tariffs loom over their operations in 2025, these Buffett-backed conglomerates are proving their mettle. Warren Buffett’s berkshire hathaway, which owns between 8.5% and 9.8% of each company, has staked its reputation on their long-term viability. But can these trading giants withstand the financial and geopolitical pressures of a trade war?
Tariff Pressures and Profit Challenges
The U.S. trade war has hit Japan’s trading sector hard. A 10% universal tariff on Japanese exports and a 25% levy on automobiles—alongside the threat of a 24% tariff on other goods—have forced companies to recalibrate. Mitsubishi Corp, for instance, now forecasts a 26% drop in net profit for FY2026, citing tariff-driven costs and the loss of one-time asset-sale gains. Meanwhile, Mitsui’s net profit is expected to fall 15% to ¥770 billion, spurring a 7% share price dip after its Q1 results.
Yet resilience shines through. Despite these headwinds, all five companies have maintained or increased shareholder returns. Mitsubishi hiked its dividend by 10 yen to 110 yen per share and preserved its ¥1 trillion buyback program. Sumitomo set aside ¥40 billion to buffer tariff risks but still boosted its dividend to ¥140 per share. Itochu, the standout performer, projects a record ¥900 billion net profit driven by its non-resource divisions, while offering a ¥150 billion buyback plan.
Why Buffett Stays the Course
Berkshire’s bet hinges on three pillars: undervalued stocks, generous yields, and strategic financing advantages.
Valuation Discounts: The trading houses trade at P/E ratios far below U.S. peers. Itochu’s 12.1x P/E contrasts sharply with the S&P 500’s 23x multiple. Mitsui’s P/E of 8.6x underscores its bargain status.
Shareholder Returns: Combined dividend and buyback yields range from 4.32% (Itochu) to 7.84% (Mitsubishi)—a stark contrast to the 1.5% yield of the S&P 500.
Cost Advantage: With Japan’s Bank of Japan maintaining a 0.5% policy rate, Berkshire can borrow yen at rock-bottom rates. Its ¥1.9 trillion in yen-denominated bonds issued in 2024 and 2025 carry interest costs of just ¥135 billion, far below the ¥812 billion in dividends it receives annually from its holdings.
Strategic Strengths Amid Uncertainty
Buffett admires these companies’ diversified operations—spanning energy, agriculture, and technology—and their disciplined capital allocation. Unlike short-term-focused private equity firms, they prioritize long-term stability. Mitsubishi CEO Katsuya Nakanishi attributes Berkshire’s stake increases to trust in this strategy.
Even as Japan’s GDP growth forecast for 2025 was slashed to 0.5%, the trading houses’ ADRs have surged 16.9% year-to-date, outperforming the Morningstar Japan Index’s 6% gain. This resilience suggests markets are pricing in their ability to navigate trade disruptions.
Conclusion: A Calculated Gamble with Data-Backed Optimism
The Japanese trading houses face significant risks—from tariffs to geopolitical tensions—but their fundamentals remain compelling. Berkshire’s $23.5 billion stake (up from $13.8 billion in 2024) reflects confidence in their ability to endure. Key data points reinforce this outlook:
- Dividend yields (4.32%–7.84%) and buybacks (¥1 trillion+) offer superior returns to global benchmarks.
- Yen-denominated debt costs are a fraction of dividend income, shielding profits.
- Despite profit declines, all five companies have maintained shareholder payouts, signaling financial discipline.
While tariffs may dampen near-term earnings, the trading houses’ global supply chain reach and undervalued valuations position them for recovery. As Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.” With U.S. tariffs testing investor resolve, Berkshire’s patience could soon be rewarded.
In a world of geopolitical uncertainty, these Buffett-backed conglomerates are proving that old-school value investing—and the right mix of diversification and yield—still holds sway.
