Classic never goes out of style! Berkshire plans to increase holdings in Japan's five major trading companies, "Strong cash flow + dividends + buybacks" firmly lock in long-term capital

According to Zhitong Finance APP, the positions in Japanese trading houses established during the Buffett era are becoming a long-term allocation for American insurance and investment giant Berkshire Hathaway, intended to span the transition in management rather than being staged trades awaiting an exit. Berkshire began buying shares in the five major trading companies in July 2019 and first publicly disclosed these holdings in August 2020, with a stake slightly above 5% in each company; it subsequently increased its holdings, and the initial upper limit on shareholding was later eased with the consent of the investee firms. Masahiro Okafuji, chairman of Itochu Corp, one of Japan’s five major trading houses, stated on Wednesday that Berkshire is considering increasing its stake in Japanese sogo shosha.

Over the past six years, Berkshire Hathaway, long steered by the “Oracle of Omaha” Warren Buffett, has held approximately 10% of each of these companies. At the time, Buffett valued the five trading houses for having a diversified holding structure similar to Berkshire’s, for initial low valuations, and for prudent capital allocation, consistent dividends, reasonable share buybacks, and relatively restrained executive compensation policies.

In an interview in early September, Greg Abel, who officially succeeded Berkshire veteran Warren Buffett as CEO in January this year, said that the group planned to keep its stakes in the five Japanese trading houses for decades and might even increase its holdings.

A notice from Itochu Corp in March this year also confirmed that Berkshire had increased its voting rights to 10.07% through additional purchases and was considering further increases in the future. The core message released by Masahiro Okafuji this time is that Berkshire’s willingness for long-term holding has not weakened with the leadership transition, the shareholding ratio could rise further, and, emphasized that even at higher shareholding ratios, Berkshire would not excessively intervene in operating activities.

Itochu says Berkshire may increase its stake in Japanese trading houses

According to reports by Japanese domestic media, a core official from the industry lobby group representing Japan’s trading companies said Berkshire Hathaway is considering increasing its holdings in Japanese trading houses.

Masahiro Okafuji, chairman of the Japan Foreign Trade Council, said after meeting with Berkshire CEO Greg Abel earlier this month that he believes the American investment firm “intends to hold these trading companies’ shares for the long-term and is even considering increasing its stake.”

Berkshire holds more than 10% of Mitsubishi Corp, Sumitomo Corp, Mitsui & Co, Marubeni Corp, and Itochu Corp. Okafuji also serves as chairman of Itochu. Earlier this month, Abel met with executives of these companies in Japan and, in an interview with Nikkei, said Berkshire could increase its stakes further.

The American firm, previously led by legendary investor Warren Buffett, first invested in Japanese trading houses over six years ago and has steadily increased its holding since. The company also issues yen-denominated bonds on a regular basis.

At the regular press conference of the Japan Foreign Trade Council on Wednesday, Okafuji stated that Berkshire is satisfied with the “economic moat” possessed by Japanese trading houses, including their broad global network and advanced capital allocation capabilities—advantages that present significant barriers to entry. These are among the reasons for Berkshire Hathaway’s investment in these companies.

“Berkshire will not nitpick the business operations of the trading houses,” he said in an interview. “Although Berkshire currently holds about 10% of these companies’ shares, the company says even if the stake rises to 15%, they will not interfere. As a shareholder, this makes Berkshire extremely valuable to us.”

Okafuji said although cooperation between Berkshire and the Japanese trading houses is often discussed, the American company is simultaneously a shareholder in these enterprises, so if both sides pursue larger-scale business cooperation, conflicts of interest could arise.

The ‘Compound Relay’ of the Five Major Trading Houses—A Leadership Change Without Shifting Long-term Investment Doctrine

The long-term stock performance of the five major trading houses has already significantly outperformed Japan's main index. Using share price increases (excluding dividends) from the end of 2020 to the end of 2025, quoted in yen and calculated using the annual returns disclosed by market platforms, Mitsubishi Corp and Mitsui & Co rose approximately 323% and 391%, respectively; Sumitomo Corp, Marubeni, and Itochu Corp rose by approximately 296%, 534%, and 233%.

By comparison, over the same period, the Nikkei 225 Index rose about 84% cumulatively, with all five companies’ cumulative growth rates exceeding it by around 150 to 451 percentage points. These comparisons are for the full five-year period mentioned, not the rolling five-year return up to now, nor Berkshire’s actual investment return after phased purchases, dividend receipts, or conversion to USD.

During Buffett’s leadership, Berkshire favored the five trading houses primarily for their “global operating assets + capital allocation capability," not just their trading businesses or commodity exposures. In the 2024 shareholder letter, Buffett explicitly noted that these companies have wide-ranging business interests and operate similarly to Berkshire; what attracted him initially was the contrast between their strong financials and low share prices. He subsequently became more convinced by their management teams, capital utilization methods, and shareholder-friendly policies, including moderate dividend increases, buybacks at appropriate times, and restrained executive compensation.

Berkshire’s willingness to continue holding these positions long term, and to even consider adding more after significant price appreciation, reflects its long-term confidence in the five major trading houses’ ability to continuously generate cash flow, allocate capital efficiently, and return value to shareholders through dividends and buybacks.

The “moat” stressed by Okafuji—its global network and capital allocation capability—can thus be understood as having two vital value layers: One is the long-accumulated commercial relationships and operational abilities that make it difficult for competitors to swiftly replicate their business foundations; the other is management’s ability to allocate capital among diverse businesses and choose between reinvestment, buybacks, and dividends. From an allocation mechanism perspective, what justifies a long-term premium valuation is not simply “diversified operations,” but whether the diversified businesses can continuously generate cash flow, and whether retained funds can go on to generate investment returns above the cost of capital.

The second advantage is matching yen-based financing with yen equity assets, aligning long-term operating returns with the financing structure. Berkshire’s 2025 annual report shows that the total investment cost for the five trading houses was $15.382 billion, with a year-end market value of $35.368 billion and annual dividends received of $862 million; its borrowings in Japan roughly correspond to the yen cost of these investments, with an average financing cost of 1.2% and a weighted average remaining tenure of about 5.75 years. Buffett previously explained that the yen borrowings are at fixed rates, intended to keep currency effect neutral rather than bet on yen movement. From a financial structure perspective, this arrangement can reduce currency mismatch risk while supporting long-term holdings with low financing costs.