The Japanese trading house positions established during the Warren Buffett era are evolving into a long-term strategic allocation for Berkshire Hathaway, the American insurance and investment titan, persisting across a leadership transition rather than serving as a temporary trade awaiting an exit. Berkshire first acquired stakes in the five major trading houses in July 2019 and publicly disclosed these holdings in August 2020, with each position slightly exceeding 5%. The company has since progressively increased its stakes, with the initially agreed ownership caps modestly relaxed following approval from the investee companies.

Masahiro Okafuji, chairman of Itochu Corp, one of the five major trading houses, stated on Wednesday that Berkshire is contemplating increasing its stakes in Japan's general trading companies. Over the past six-plus years, under the long-time stewardship of legendary investor Buffett, Berkshire has steadfastly maintained roughly 10% ownership in each of these firms. Buffett's initial assessment highlighted that the five trading houses boast a diversified holding structure akin to Berkshire's own model, presented initially attractive valuations, and demonstrated prudent capital allocation, consistent dividend payouts, reasonable buyback practices, and restrained executive compensation. Greg Abel, who formally succeeded Berkshire's veteran leader Warren Buffett as CEO in January of this year, mentioned in an early September interview that the group intends to retain its stakes in Japan's five major trading houses for decades, potentially even expanding its holdings. An announcement from Itochu in March also confirmed that Berkshire had increased its voting rights stake to 10.07% through additional purchases and is considering further incremental acquisitions.

The core signal from Okafuji's latest remarks points to an unwavering long-term commitment despite the leadership shift, with the possibility of further raising stake percentages. He emphasized that Berkshire, even with a larger ownership position, would not interfere excessively with management operations. According to local Japanese media reports, the head of the industry lobbying group representing Japan's trading houses indicated Berkshire is actively considering raising its stake in these firms. Okafuji, who also serves as chairman of the Japan Foreign Trade Council, noted that following a meeting with Berkshire CEO Greg Abel earlier this month, he believes the American investment powerhouse "intends to hold these trading house stakes for the long haul and is even deliberating an increase."

Berkshire's ownership in Mitsubishi Corp, Sumitomo Corp, Mitsui & Co, Marubeni Corp, and Itochu Corp all surpass the 10% threshold. Abel met with leaders of these companies in Japan earlier this month and told the Nikkei newspaper that Berkshire might enhance its stakes. The American firm, previously steered by Buffett, first invested in Japan's trading houses over six years ago and has gradually built up its positions since. It also routinely issues yen-denominated bonds. At a routine press conference of the Japan Foreign Trade Council on Wednesday, Okafuji expressed satisfaction with the "economic moats" these trading houses possess, including expansive global networks and highly sophisticated capital allocation capabilities, which erect significant entry barriers for competitors. This constitutes a key rationale behind Berkshire's investment.

"Berkshire won't nitpick the operational details of the trading houses," he stated during the interview. "While Berkshire currently holds around a 10% stake in these companies, it has indicated it wouldn't be overly prescriptive even if the stake were raised to 15%. As a shareholder, this makes Berkshire an extremely valuable partner for us." Okafuji also noted that although the collaboration between Berkshire and the Japanese trading houses is a frequent topic of discussion, the American firm is simultaneously a shareholder in these businesses. Consequently, if both parties pursue larger-scale business cooperation, potential conflicts of interest could arise.

The long-term share price performance of the five major trading houses has markedly outpaced the broader Japanese market. Using a consistent metric measuring cumulative share price gains from the end of 2020 to the end of 2025, denominated in yen and excluding dividends—calculated by compounding annual returns as disclosed by market data platforms—Mitsubishi Corp and Mitsui & Co have risen approximately 323% and 391%, respectively. Sumitomo Corp, Marubeni, and Itochu have advanced roughly 296%, 534%, and 233%, respectively. For comparison, the Nikkei 225 index has climbed about 84% over the same period. All five companies have significantly outperformed the index, with their extra returns ranging from approximately 150 to 451 percentage points. This comparison reflects historical performance over that complete five-year span, not a rolling five-year return as of today, nor Berkshire's actual investment yield after phased purchases, dividend receipts, and conversion into US dollars.

Under Buffett's leadership, Berkshire's affinity for the five trading houses stemmed primarily from their "global operating assets plus capital allocation capability," rather than just trading businesses or commodity price exposure. In his 2024 shareholder letter, Buffett explicitly noted these enterprises hold a wide array of business interests and operate in a manner similar to Berkshire. What initially attracted him was the disconnect between their sound financial records and modest stock prices; subsequently, he grew more appreciative of their management teams, capital deployment methods, and approach to shareholders, including moderate dividend increases, timely share buybacks, and restrained executive pay. Even after the substantial rally in the trading houses' share prices, Berkshire's willingness to remain a long-term holder, and even consider increasing its positions, underscores its enduring confidence in their ability to generate consistent cash flow, allocate capital effectively, and reward shareholders through dividends and repurchases.

The "moat" emphasized by Okafuji—spanning global networks and capital allocation—can be interpreted as possessing two layers of significant value. The first is the accumulation of long-standing business relationships and operational expertise, which makes it difficult for competitors to swiftly replicate their foundational business model. The second is management's capacity to allocate capital across diverse business segments, making choices between reinvestment, buybacks, and dividends. Extrapolating from this allocation mechanism, what genuinely merits a long-term valuation is not the label of "business diversification" itself, but whether the diversified operations can sustainably generate cash flow and whether retained earnings can continue to deliver robust investment returns exceeding the cost of capital.

The second advantage involves matching yen-based financing with yen-denominated equity assets, allowing long-term operational returns and the financing structure to complement each other. Berkshire's 2025 annual report indicates that the cumulative investment cost in the five trading houses stands at $15.382 billion, with a year-end market value of $35.368 billion and dividends received during the year totaling $862 million. Its borrowing in Japan roughly corresponds to the yen cost of these investments, carrying an average financing rate of 1.2% and a weighted average remaining term of approximately 5.75 years. Buffett has previously clarified that the yen borrowings use fixed rates, with the primary goal of achieving near currency neutrality rather than speculating on yen movements. From a financial structure perspective, this arrangement helps mitigate some currency mismatch risks while supporting long-term holdings with low financing costs.