Berkshire × Japan · Deep dive

What Berkshire Hathaway bought in Japan — and why it matters

8 min read · Updated May 2026

In August 2020, Warren Buffett quietly disclosed that Berkshire Hathaway had taken roughly 5% stakes in five of Japan's largest trading companies. The market reaction was confused. Most American investors had never heard of "sōgō shōsha." Even those who knew the names didn't know how to value them.

Six years later, that bet has become one of Berkshire's best international investments. And in 2026, Berkshire widened its Japan exposure with a strategic stake in Tokio Marine — Japan's largest property and casualty insurer.

"They are similar in many ways to Berkshire itself." — Warren Buffett, 2023 letter to shareholders

What is a sōgō shōsha, anyway?

The five companies — Mitsubishi, Mitsui, Itochu, Marubeni, and Sumitomo — are best understood as conglomerates. They invest in, trade, and operate businesses spanning energy (LNG, oil), metals (iron ore, copper), food and agriculture (grain, salmon), industrial machinery, retail (FamilyMart for Itochu), real estate, healthcare, and finance.

Think Berkshire Hathaway, but with a global trading and supply-chain backbone built up over a century. Each one earns billions in stable cash flow, has decades of accumulated relationships across emerging markets, and trades at modest valuations.

Why the cheap valuation?

Despite returning huge capital to shareholders and steadily growing earnings, the trading houses traded at price-to-earnings ratios in the high single digits for years — well below US peers. Several factors explain this:

• Conservative Japanese accounting treats a lot of value as "hidden" on the balance sheet (real estate at historical cost, cross-shareholdings, etc.)
• Foreign investors largely ignored Japan after decades of stagnant returns
• The conglomerate structure makes them harder to model than focused companies

The valuation gap is still there

The 2026 chapter: Tokio Marine

In 2026, Berkshire widened its Japan exposure with a strategic stake in Tokio Marine Holdings through National Indemnity. Tokio Marine is Japan's largest listed property-and-casualty insurer, with growing US exposure through past acquisitions.

This fits Berkshire's broader pattern: it has long owned major insurance operations (GEICO, General Re, National Indemnity), and has used insurance "float" — premiums collected before claims are paid — as a low-cost source of investment capital.

What's the takeaway?

For individual investors, the question is whether the rerating is over. The Nikkei has crossed 60,000 and trading houses are well off their 2020 lows. But the gap to S&P 500 valuations is still substantial — and corporate governance reform in Japan is still in its early innings.

Disclaimer: This article is for educational purposes only. It is not investment advice or a recommendation to buy or sell any security. Past performance does not indicate future results.

Policy · Deep dive

Japan's defense buildup: the biggest policy shift since WWII

7 min read · Updated May 2026

For most of the postwar period, Japan's defense spending was capped near 1% of GDP — a self-imposed limit reflecting the country's pacifist constitution. That changed in late 2022, when Prime Minister Kishida announced Japan would double its defense budget to roughly 2% of GDP by 2027.

This is approximately ¥43 trillion (~$280 billion at current rates) in defense spending over five years — the largest sustained increase in postwar Japanese history.

"Japan stands at a turning point in history." — National Security Strategy, December 2022

Why now?

Three factors converged:

• China's military expansion in the East China Sea and around Taiwan
• North Korea's accelerating missile program, with regular test launches
• Russia's invasion of Ukraine — a wake-up call about the fragility of regional security assumptions

Japan also faces a generational reckoning with deferred procurement: aging F-15 fighters, submarine fleet renewal needs, and an arsenal designed for a previous era.

Where the money is going

The budget is targeting seven priority areas: standoff defense capabilities (long-range missiles), integrated air and missile defense, unmanned systems, cross-domain operations, command and control, mobile deployment, and sustainability of supply chains.

The listed companies that benefit

Mitsubishi Heavy Industries (7011.T)

Japan's largest defense contractor, MHI is involved in fighter aircraft (including the next-gen GCAP fighter program with the UK and Italy), destroyers, missiles, and ground systems. Defense revenue is a relatively small portion of MHI's overall business but is set to grow substantially as the budget ramps up.

IHI Corporation (7013.T)

IHI manufactures jet engines for Japan's F-15J fleet and the F-2 fleet, and is co-developing engines for next-generation fighters. The company also has commercial aerospace and space launch businesses.

Kawasaki Heavy Industries (7012.T)

Japan's primary submarine builder. Kawasaki produces the Sōryū and Taigei-class submarines, plus military helicopters, patrol aircraft, and missile components. As Japan looks to expand its submarine fleet from 22 to 24+ boats, Kawasaki is a direct beneficiary.

What's already priced in?

Defense stocks have rallied significantly since the 2022 announcement. The question for new investors is whether the multi-year spending ramp is fully reflected in current valuations, or whether actual contract awards over the coming years will continue to surprise to the upside.

Disclaimer: This article is for educational purposes only. Not investment advice. Past performance does not indicate future results.

AI & Semiconductors · Deep dive

Japan's AI & semiconductor boom: TSMC, Rapidus, and the equipment giants

8 min read · Updated May 2026

The Nikkei breaking 60,000 in 2026 was driven by something specific: the global AI boom finally reaching Japanese shores. Japan didn't have an "Nvidia of Japan." But it had something arguably more valuable — a deep ecosystem of chip equipment makers, materials suppliers, and packaging specialists that every fab in the world depends on.

"You can't make a chip anywhere without Japanese equipment, Japanese chemicals, or Japanese substrates."

The Kumamoto effect

In February 2024, TSMC opened its first Japanese fab in Kumamoto — a project called JASM (Japan Advanced Semiconductor Manufacturing) backed by Sony Semiconductor Solutions, Denso, and Toyota. The Japanese government provided over ¥1 trillion in subsidies.

This single investment changed the narrative. Japan went from "we used to be in semiconductors" to "we're an active node in the global supply chain again." TSMC has since announced a second Kumamoto fab targeting more advanced nodes.

Rapidus: Japan's bet on cutting-edge logic

While TSMC handles legacy and trailing-edge nodes, Japan is also taking a moonshot. Rapidus, a government-backed consortium, is targeting 2nm production by 2027. The technology comes via a partnership with IBM. Whether Rapidus succeeds is genuinely uncertain — the engineering and yield challenges are enormous — but the ambition is real, and the supplier ecosystem is being built either way.

The equipment and materials winners

Tokyo Electron (8035.T)

One of the world's top three semiconductor equipment makers, alongside ASML (Netherlands) and Applied Materials (US). TEL specializes in deposition, etching, cleaning, and coating equipment. Every chip in your phone, laptop, or car was likely made on TEL machines somewhere along the line.

Advantest (6857.T)

Advantest dominates the global market for automated test equipment (ATE) — the machines that verify chips work before they ship. AI chips like Nvidia's H100 and Blackwell require extensive testing, and Advantest's revenues have surged accordingly.

Shin-Etsu Chemical (4063.T)

The world's largest producer of silicon wafers — the foundational substrate that every chip is built on. Shin-Etsu and SUMCO together control roughly 60% of the global wafer market.

Disco, Lasertec, Ibiden, Kokusai Electric

Disco makes precision dicing and grinding equipment for chip packaging. Lasertec produces inspection equipment for EUV photomasks. Ibiden makes the high-end IC substrates used in Nvidia's GPUs. Kokusai Electric specializes in deposition tools.

What about Kioxia?

Kioxia, the Japanese memory company spun off from Toshiba, IPO'd in December 2024. It's a play on the NAND flash memory cycle and AI-driven storage demand — but as a 2024 IPO, it doesn't fit into a long-term performance comparison.

The Index in context

Some of these names have multiplied many times over the last six years. To put it in perspective, here is how the broader index moved:

The Nikkei rose ~113% in yen terms over six years — but a 31% yen depreciation reduced that to ~47% in USD terms. Individual AI-related stocks like Tokyo Electron and Advantest have meaningfully outperformed the broader index.

Disclaimer: This article is for educational purposes only. Not investment advice. Individual stock performance figures referenced are approximate and price-only. Past performance does not indicate future results.