Buffett's Japanese Stocks Rebound After Plunge

This week’s global market turmoil began in Japan, where the Nikkei 225 index experienced a dramatic plunge of 12.4% on Monday, marking its worst day since the infamous "Black Monday" in 1987. The sell-off was sparked by a small interest rate increase by the Bank of Japan, raising rates to their highest level in 15 years and leading to the unwinding of the yen "carry trade." Despite the initial chaos, the market managed to recover most of its losses, closing the week down only 2.5%. Warren Buffett, whose Berkshire Hathaway holds significant investments in Japan, saw his stocks drop as much as 30% at the onset of the crisis. However, like the broader market, these stocks rebounded by the week's end. Berkshire Hathaway owns an 8% stake in each of Japan's five leading trading houses—Itochu, Marubeni, Mitsubishi, Mitsui, and Sumitomo—totaling an investment of approximately $20 billion. Year-to-date, shares of Itochu and Mitsubishi have risen over 10%, while the others have seen smaller gains. Buffett's strategy in Japan began in 2019 when he sold Japanese debt to fund investments in these trading houses, which import essential resources into Japan. As of the end of 2023, Berkshire had realized over $8 billion in unrealized gains from these investments. Buffett, now 93, has committed to not exceeding a 9.9% stake in these companies without board approval. In addition to his Japanese investments, Buffett has been actively selling stocks, including halving his stake in Apple, and has built a substantial cash reserve for Berkshire in the second quarter, indicating a cautious approach amid market volatility.