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Berkshire Hathaway's Japan bet: $1.9B Yen bond sale signals long-term commitment and biggest sale in five years

Warren Buffett’s Berkshire Hathaway has raised ¥281.8 billion ($1.9 billion) in a seven-tranche yen-denominated bond deal. This marks the company’s largest yen bond issuance in five years. According to a term sheet reviewed by Reuters, the bonds were issued with tenors of 3, 5, 7, 10, 20, 28, and 30 years.

The largest portion of the funds came from the 3-year tranche, which raised ¥155.4 billion. Another ¥58 billion was raised from the 5-year bonds. Initially, a 15-year tranche had been proposed but was dropped during the transaction. Bookrunners confirmed that final prices for each tranche were set at the lower to middle end of revised price guidance.

This yen bond issuance reflects Buffett’s growing interest in Japan's capital markets. Over the past four years, Berkshire Hathaway has steadily increased its equity stakes in Japan’s top five trading houses. The US investment firm first made its move into Japanese stocks in 2020, and as of February 2024, it owns around 9% of each of these firms.

In a filing with the US Securities and Exchange Commission, Berkshire Hathaway confirmed that the proceeds from this bond sale would be used for general corporate purposes. However, the company did not disclose the size of the deal in that filing.

Berkshire’s yen bond issuance follows its previous sale of ¥263.3 billion in bonds earlier this year, making 2024 a significant year for the company’s yen-denominated fundraising efforts.

Takehiko Masuzawa, head of trading at Phillip Securities Japan, noted that this year’s bond sales are the largest since Berkshire Hathaway began issuing yen bonds. “Berkshire's yen bond sales this year is the biggest in a year since it started selling yen bonds and this indicates their expectations for upside of Japanese stocks,” he said.

Masuzawa also highlighted that investors are paying close attention to Berkshire's next moves in Japan. “The market is looking at what kind of stocks will be their next target. Investors see value stocks which pay higher dividends, such as banks and insurers, will be the most likely targets,” he added.

The significant bond sale highlights Buffett’s confidence in the Japanese market and signals further investments from Berkshire Hathaway in Japan’s financial landscape.