Berkshire Hathaway's Second Yen-Denominated Bond Issuance This Year - What Does It Signify?

For Berkshire Hathaway, raising funds in yen may have the following benefits:

Oshida stated that "There are more foreign issuers visiting Japan than I remember, and this week alone, I met with at least seven or eight bond issuers." For overseas issuers like Berkshire Hathaway who invest in yen assets, raising funds in yen can be advantageous because they do not have to pay foreign exchange costs.

Analysts believe that after continuously increasing stakes in Japan's five largest trading houses, financial stocks (insurance and banks) may become the next value target for the "Oracle of Omaha" in the Japanese market, based on the prospect of Bank of Japan tightening policies. Masatoshi Kikuchi, Chief Equity Strategist at Mizuho Securities, said,

However, Atsuko Ishitoya, a strategist at Daiwa Securities, believes that although bank stocks may attract Buffett's attention, he may focus on expanding his holdings in the five major trading houses. In June, Berkshire Hathaway announced plans to increase its stake in each of the five major trading houses to a maximum of 9.9%. Mineo Bito, President of Tokyo Bito Financial Services, said,

Previously, Buffett's endorsement has been helpful to both Japan's five major trading houses and the Japanese stock market as a whole. Since a report in April stated that Buffett increased his stakes in Japan's five major trading houses and sought to increase holdings in more Japanese stocks, yen bond sales have risen by over 50% since this April, reaching around 2.5 trillion yen, the highest level in five years. The share prices of Japan's five major trading houses have risen by over 20%. During this period, the overall Japanese stock market has also shown an upward trend, with the Nikkei 225 index soaring to its highest level in decades.

Before Buffett returned to the Japanese stock market, it had been stagnant for 30 years. However, since Berkshire Hathaway issued yen bonds and started buying the five major trading houses, the "Buffett Effect" has emerged in the Japanese stock market. After the disclosure of their new large shareholder status, these five stocks saw a significant rise during the middle of 2020, which was the strongest period of the Buffett effect since the outbreak of COVID-19. Investors bet on Bank of Japan's ultra-loose monetary policy and fiscal reform commitments made by the late Prime Minister, Shinzo Abe.

As a contrarian investor, when Berkshire Hathaway began increasing its holdings in trading companies, global investors were nearing the end of a 32-month phase in which they sold an unprecedented $13.2 billion worth of Japanese stocks. The Japanese stock market has performed well in recent years, and the TOPIX index is currently the best-performing index globally. However, if Buffett were to sell or significantly reduce his investment in Japan at this point, could the Japanese stock market continue to outperform the global market based on its own attractiveness, or would it suffer a setback due to the fade of the Buffett effect?

Considering that Berkshire Hathaway reissued yen bonds recently, we might not get the answers in the near future. However, the question of "What might happen to the market if Buffett stops and walks away" is one that all investors in the Japanese stock market would ask themselves.