Berkshire Hathaway’s $6.25 billion investment in the Japanese market was about as close as any business deal can get to a once-in-a-lifetime opportunity.
“That is a no-brainer,” Charlie Munger, Berkshire’s vice chair, said during an appearance on the Acquired podcast. “If you’re as smart as Warren Buffett, maybe two or three times a century you get an idea like that.”
Starting in 2020, Berkshire Hathaway began buying up shares in a series of Japanese conglomerates—Itochu Corp., Marubeni Corp., Mitsubishi Corp., Mitsui, and Sumitomo Corp. Much like Berkshire Hathaway itself, these companies have an assortment of different, usually long-term, investments and holdings in other companies. What made the deal so appealing, according to Munger, was that interest rates in Japan were as low as half a percentage point at the time.
“You could borrow for 10 years all the money ahead, buy the stocks, and the stocks paid 5% dividends,” Munger said. “So a huge flow of cash with no investment, no thought, no anything. How often do you do that?”
Munger’s enthusiasm for the deal is well warranted. Since August 2020, when Berkshire Hathaway revealed a 5% stake in each of the Japanese trading houses, their stocks have gone up an average of 94%.
“It was like having God opening a chest and just pouring money into it,” Munger said on the podcast.
As of June, Berkshire Hathaway’s position in the companies in question rose to 8.5%. Berkshire Hathaway also pledged not to take its stake in any of the five companies beyond 9.9% without board approval. Buffett said he wrote a letter to each of the CEOs to inform them he wouldn’t go beyond that threshold. “It was my word,” he told CNBC in April.
Berkshire rally lifts all Japanese stocks
Berkshire Hathaway’s investment, and specifically Buffett's repeated endorsements of the companies, has led to a stock market rally across Japan.
Over the years the duo’s stake in the Japanese holding companies increased to billions of dollars, with the roughly $6 billion invested in 2020 growing to about $17 billion today, according to Insider. The five Japanese companies Berkshire Hathaway invested in have sprawling holdings in assets like real estate, chemicals, food, rubber plantations, and copper mines. Much of their business revolves around importing various goods to the Japanese islands, which, while flush with cash thanks to Japan’s advanced economy, have relatively scarce natural resources.
Berkshire Hathaway’s unique position as a famed investor helped it get the extremely favorable interest rates to fund its “no-brainer” move into these Japanese companies. “We could do that… Nobody else could,” Munger said on the podcast. “It looked attractive at half a percent, but you couldn’t get it. Berkshire with its credit could.”
Buffett has left open the door to do further deals with any of the five companies should the opportunity present itself. “We’ll never run out of money,” Buffett said in the CNBC interview. “They can call us anytime…if we make a deal the money will be on the way.”
