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Warren Buffett’s Berkshire Hathaway Inc. recently concluded its second yen bond deal of the year, further fueling speculation about the billionaire investor’s growing interest in Japan’s stock market. The firm, in a ¥122 billion ($810 million) offering featuring five tenors ranging from three to 35 years, achieved a reduction in spreads compared to its previous sale. This move follows Berkshire’s announcement in June of increased holdings in Japanese firms like Mitsubishi Corp. and Itochu Corp., contributing to a surge in the country’s stock market.
Berkshire Hathaway, a significant overseas issuer of yen debt, has conducted 32 of its last 40 bond deals in Japanese currency. Recent reports from a Daiwa Securities Co. analyst suggest that Buffett might be eyeing investments in Japanese banks, insurers, and automakers.
Despite coupon increases on the Berkshire bonds compared to the April sales, the rise was less than equivalent swap rates, leading to tightened spreads. This strategic move comes as many expect the Bank of Japan (BOJ) to adjust its monetary policy by April. While there are anticipations of higher interest rates, Berkshire’s successful deal in a challenging environment reflects its appeal to investors, offering a nearly 1% coupon on the three-year bond.
Foreign issuers, including Berkshire Hathaway, are leveraging Japan’s relatively lower interest rates, with the BOJ’s recent adjustments in sovereign bond yields further encouraging issuance. The stability of interest rates and the attractiveness of funding in yen for entities investing in yen assets contribute to the appeal for foreign issuers.
The yen bond market has seen robust activity, with sales from foreign issuers increasing by over 50% since the fiscal year began on April 1, totaling around ¥2.5 trillion. This trend indicates a notable interest in Japanese bonds, particularly from foreign entities seeking cost-effective funding.
Berkshire Hathaway’s strategic moves in the Japanese market align with its longstanding investment philosophy, and observers will be closely watching for further developments in Buffett’s investment strategy in Japan.
