bloomberg.com - Berkshire may boost japan trading house holdings itochu says

Berkshire Hathaway Inc. is considering increasing its holdings in Japanese trading houses, according to the head of the lobby group for the firms.

Japan Foreign Trade Council Chairperson Masahiro Okafuji said that after meeting earlier this month with Berkshire CEO Greg Abel, he believes the US investment firm “intends to hold its stakes in the trading houses for the long term and is even considering increasing its holdings.”

Berkshire owns stakes of more than 10% in Mitsubishi Corp. Sumitomo Corp., Mitsui & Co., Marubeni Corp. and Itochu Corp., of which Okafuji is also chairperson. Abel met with leaders of the firms in Japan earlier this month and told the Nikkei newspaper in an interview that Berkshire may raise its holdings in the companies.

The US company, formerly led by legendary investor Warren Buffett, made its first foray into the Japanese trading houses more than six years ago, and has progressively increased its stakes since then. It also issues yen-denominated bonds on a regular basis.

Okafuji, who spoke Wednesday at the Foreign Trade Council’s regularly scheduled press briefing, said Berkshire was happy with the “economic moat” that Japan’s trading houses possess, including extensive global networks and highly sophisticated capital allocation, creating significant barriers to entry. That is one of the reasons Berkshire Hathaway has invested in them.

“Berkshire does not nitpick the trading houses’ activity,” he said. “While Berkshire currently owns about 10% of the trading houses, the company indicated it would not make a fuss even if those stakes were raised to 15%. As a shareholder, that makes Berkshire extremely valuable to us.”

While collaboration between Berkshire and the Japanese trading houses is often discussed, the US firm is also a shareholder in those companies, raising potential conflicts of interest should they pursue larger business opportunities, Okafuji said.