Warren Buffett’s Big Bet on Japan: Why the Oracle of Omaha Has Turned East

In 1998, Warren Buffett dismissed Japan. The numbers didn’t add up. Despite rock-bottom borrowing costs, he refused to touch Japanese companies that struggled to deliver returns on equity. 

Now, in 2025, that same investor has amassed $23.5 billion in five of Japan’s largest trading houses, becoming one of the most influential foreign stakeholders in the country’s corporate landscape. So what changed?

Warren Buffet’s Big Bet on Japan: From Reluctant Skeptic to Strategic Insider

Buffett’s cautious stance on Japan dates back to its infamous “Lost Decade”—an era of near-zero interest rates and economic stagnation. 

Japan’s corporate earnings were weak, inflation was non-existent, and structural reforms lagged. Cheap money alone wasn’t enough to lure Buffett into what he deemed “lousy businesses.” 

True to his philosophy, he favored quality over affordability. The “margin of safety”—his guiding light from Benjamin Graham—meant avoiding risk even when it was inexpensive.

But Japan’s trading giants offered something different.

Beginning in 2019 and publicly revealed in 2020, Buffett’s Japan pivot was revealed as Berkshire Hathaway announced sizable positions in Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo—the five great sōgō shōsha, or general trading houses. 

These firms span everything from logistics and natural resources to retail, food, and energy—a structure that mirrors Berkshire’s own multi-sector footprint.

Buffett’s move wasn’t just diversification. It was strategic symmetry. These companies deliver strong cash flow, conservative capital allocation, and dependable dividends—key traits that resonate with Buffett’s long-standing investment ethos.

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Warren Buffet: Currency Arbitrage and Regulatory Foresight

Buffett’s execution was as calculated as his choice of targets. He financed the deals using yen-denominated debt, exploiting Japan’s ultra-low interest rate regime to effectively arbitrage between cheap local borrowing and high-dividend equities. 

In doing so, he hedged against currency volatility and maximized return on capital without converting USD to yen outright.

More surprising was the regulatory green light. Japan typically discourages foreign investors from exceeding 10% ownership thresholds. 

Yet in 2024, Buffett disclosed that he had received explicit permission to exceed those limits—a rare concession, signaling deep trust between Berkshire and Japanese corporate leadership.

By year’s end, his investments—initially acquired for $13.8 billion—were worth $23.5 billion, yielding nearly $10 billion in capital gains, not counting the steady dividend income.

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Why Japan? Why Now?

Buffett’s timing aligns with a broader transformation in Japan’s economic outlook. After decades of deflation and wage stagnation, Japan’s inflation expectations have finally begun to rise. 

A recent Bank of Japan survey showed that 86.7% of households expect prices to increase over the next year—marking the strongest signal since 2024. 

Wages are climbing, prices are catching up, and the central bank is inching closer to the end of its ultra-accommodative stance.

While the Bank of Japan has yet to hike rates meaningfully, the foundation for a new economic cycle is forming. For Buffett, this presents a rare inflection point: stable companies with international exposure, operating under domestic monetary conditions that still favor investors.

In short, he’s exploiting the last vestiges of cheap money while anchoring himself to Japanese firms that are—unlike in the past—disciplined, profitable, and globally competitive.

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A Calculated Risk Amid Currency Turbulence

Of course, risks persist. Japan’s carry trade history is volatile. When U.S. interest rates spiked between 2022 and 2023, the yen surged, triggering capital flight and panic across Asian markets. That specter still looms, especially with inflation now forcing the BOJ’s hand.

But Buffett isn’t trading currencies—he’s investing in businesses. His profits come from enterprise strength, not foreign exchange speculation. That focus has insulated him from short-term shocks.

Conclusion

Warren Buffett didn’t fall for Japan’s cheap money two decades ago because the fundamentals weren’t there. In 2025, they are. 

His $23.5 billion bet is more than just a vote of confidence in Japanese trading firms—it’s a signal that value, once buried in Japan’s deflationary fog, has resurfaced with clarity.

FAQ

1. Why did Warren Buffett previously avoid investing in Japan, and what changed his mind?

In the late 1990s, Buffett dismissed Japanese equities due to weak corporate returns, chronic deflation, and a lack of structural reform. However, by 2025, his stance shifted as Japanese trading houses began exhibiting strong cash flows, disciplined capital allocation, and consistent dividends—hallmarks of the investment quality Buffett prioritizes. This evolution in fundamentals, not just valuations, catalyzed his pivot.

2. Which companies has Buffett invested in, and why are they significant?

Buffett’s $23.5 billion stake is concentrated in Japan’s five major sōgō shōsha: Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo. These conglomerates operate across sectors—from commodities and logistics to energy and retail—mirroring Berkshire Hathaway’s diversified footprint. Their global reach, financial conservatism, and cash-generating ability align with Buffett’s long-term investment philosophy.

3. How did Buffett finance his Japan positions, and what strategic advantages did that provide?

Buffett used yen-denominated debt to fund his positions, taking advantage of Japan’s prolonged low-interest rate regime. This move allowed him to capitalize on interest rate differentials, minimize forex conversion exposure, and enhance returns via arbitrage between cheap local debt and high-dividend Japanese equities—a textbook example of capital efficiency.

4. What regulatory permissions did Buffett secure, and why are they noteworthy?

Japanese law typically restricts foreign investors from exceeding 10% ownership in domestic firms without special approval. In 2024, Buffett secured explicit permission to surpass this threshold—a rare and significant regulatory concession that signals strong trust between Berkshire Hathaway and Japanese corporate governance structures.

5. Why is Buffett’s bet on Japan seen as timely and potentially transformative?

Japan’s economic climate is undergoing a critical shift, with inflation expectations rising, wages climbing, and the Bank of Japan edging away from ultra-loose policy. Buffett is positioning himself at the cusp of this transformation—investing in globally competitive companies just as the macro backdrop turns favorable. His move underscores a broader recognition that Japan’s era of undervaluation may be ending, making this a rare alignment of value and timing.