Warren Buffett sees long-term potential in Japanese companies

U.S. company Berkshire Hathaway Inc. intends to gradually increase its stake in Japan's five largest department stores, Warren Buffett said in his annual report to shareholders. The announcement could support the share prices of these companies on the Tokyo Stock Exchange.

Initially, Berkshire Hathaway $BRK-B committed not to exceed the 10% stake in these companies. However, as the company gradually reaches this limit, Japanese trading houses have agreed to increase it "slightly". Buffett's interest in these companies stems from their strong financial position, stable dividend policy and prudent capital management, factors that investors appreciate.

Long-term growth and recent fluctuations

Such companies include Mitsubishi Corp, Mitsui & Co, Itochu Corp, Sumitomo Corp and Marubeni Corp. Even so, their stocks have had a tough time in recent months, similar to the entire Japanese stock market. The Tokyo Stock Exchange has lagged behind global bourses, partly because of the strengthening yen, which has had a negative impact on exports. The Topix index is down 1.7% this year, while the MSCI Asia Pacific index is up 4.6%.

Analysts expect Buffett's entry into these companies could improve their access to foreign markets and strengthen their global strategy. Japanese department stores play a key role in the distribution of commodities, energy and industrial products, and their partnership with Berkshire Hathaway could help them expand beyond the Asian region.

Plans for decades to come

In the report, Buffett praised Japanese department stores for responsible dividend increases, judicious share buybacks and for being less aggressive in rewarding executives compared with U.S. companies. This approach is consistent with Buffett's investment strategy, which focuses on long-term stability and shareholder value.

Berkshire Hathaway has said it intends to maintain its stake in Japanese companies for "many decades" and is exploring further collaborations. For example, Mitsubishi Corp. said it is in talks with Berkshire to collaborate on specific projects, including joint investments. The company also said it will seek to increase its value and share price over the long term.

Experts speculate whether Berkshire Hathaway is planning even further expansion in the Japanese market. Buffett has demonstrated an ability to identify attractive investments with long-term potential in the past, and so investors and analysts are keeping a close eye on his next moves. If Berkshire decides to increase its stake even more significantly, it could mean further value growth for Japanese companies and the country's overall stock market.

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