In a letter to shareholders, Warren Buffett (Trades, Portfolio) announced that Berkshire Hathaway is increasing its investments in Japan, marking a significant exception to its usual focus on the U.S. market. The company began purchasing shares in five Japanese firms—Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo—nearly six years ago. These companies operate similarly to Berkshire Hathaway and have been very successful.
Berkshire first acquired shares in these companies in July 2019, impressed by their financial records and low stock prices. Over time, admiration for these firms has grown, with frequent meetings between Berkshire executives and the Japanese companies. Buffett appreciates their capital allocation, management, and investor relations. These companies regularly increase dividends and buy back shares when appropriate, and their executive compensation plans are less aggressive compared to U.S. counterparts.
Berkshire's holdings in these companies are intended to be long-term, with a commitment to supporting their boards. Initially, Berkshire agreed to keep its ownership stake below 10% in each company, but this limit may be moderately relaxed in the future. As of last year, Berkshire's total cost for these investments was $13.8 billion, with a market value of $23.5 billion. The annual dividend income from these investments is expected to be approximately $812 million by 2025, with interest costs on yen-denominated debt projected at $135 million.
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