Berkshire Hathaway, led by Warren Buffett (Trades, Portfolio), is preparing to issue multiple yen-denominated bonds, sparking market speculation about increased investment in Japan. The company has launched a seven-part bond transaction with maturities ranging from 3 to 30 years. All bonds, except the 3-year one, carry higher premiums than those issued in April. Notably, the 10-year bond has a spread of 82 basis points over mid-swaps, up from 71 basis points in April, while the 20-year bond spread is 91 basis points, compared to 78 basis points previously.
This fundraising move is closely watched by stock investors after Buffett's previous purchase of Japanese trading company shares drove the Nikkei 225 index to historic highs. In his annual letter to shareholders in February, Buffett mentioned that Berkshire Hathaway's significant investments in Japanese companies were primarily financed through yen bond issuance.
Analysts suggest that if Berkshire expands its investment horizon to include banks, insurance, and shipping companies, it could further boost the Japanese market. Nomura strategist Tomochika Kitaoka believes financial firms such as Mitsubishi UFJ Financial Group, Sumitomo Mitsui Trust Holdings, and Sompo Holdings Inc. align well with Berkshire's investment style. However, some observers speculate that Buffett may continue to focus on trading companies, especially after recent sales of Bank of America (BAC, Financial) shares.
The bond deal also serves as a critical test of demand for yen-denominated bonds. The widening long-term bond premiums reflect investor caution toward Japan's interest rate environment. The Bank of Japan is expected to maintain current interest rates at its upcoming policy meeting, following comments from Japan's new Prime Minister ruling out rate hikes for now, leading some economists to adjust their rate hike forecasts for the end of the year.
