{"id":11478,"date":"2023-11-09T05:03:01","date_gmt":"2023-11-09T05:03:01","guid":{"rendered":"https:\/\/inbudgetalerts.com\/business\/can-japan-ever-pass-the-buffett-horizon\/"},"modified":"2023-11-09T05:03:01","modified_gmt":"2023-11-09T05:03:01","slug":"can-japan-ever-pass-the-buffett-horizon","status":"publish","type":"post","link":"https:\/\/inbudgetalerts.com\/?p=11478","title":{"rendered":"Can Japan ever pass the \u2018Buffett horizon\u2019?"},"content":{"rendered":"<div>\n<p>Stay informed with free updates<\/p>\n<p class=\"article__content-sign-up-topic-description\"><span>Simply sign up to the <!-- -->Japanese business &amp; finance<!-- --> myFT Digest &#8212; delivered directly to your inbox.<\/span><\/p>\n<p><iframe class=\"article__content-sign-up-iframe close\" scrolling=\"no\" id=\"signUpIframe\" data-prev-url=\"\/register\/in-article-sign-up?ft-content-uuid=446bf09b-8cca-4f24-8ab4-b51bdcfeb93b&amp;concept-id=58e2c9ab-2425-46d2-906d-c866e7c24dd6\"><\/iframe><\/div>\n<div id=\"article-body\">\n<p>Warren Buffett\u2019s Berkshire Hathaway, its bankers confirmed on Wednesday, is planning to issue yen-denominated corporate bonds for what will be the second time this year, and the seventh since 2019.<\/p>\n<p>The two popping sounds you might be hearing are, one, the celebratory corks of \u201cJapan is back\u201d brokers and fund managers relieved that the world\u2019s most famous investor seems content to remain at this historically frustrating table for at least another hand and, two, the starting gun on weeks of speculation over what Buffett might buy next with his cheaply raised stack of local currency.<\/p>\n<p>A far more valuable debate for Japan, though, is what might happen to the market if Buffett stops and walks away. The question, then, is whether Japan\u2019s equity market has yet moved beyond its \u201cBuffett horizon\u201d \u2014 the notional point beyond which it has sufficient momentum to continue enticing new investors even if the most talismanic one loses interest.<\/p>\n<p>For now, given yesterday\u2019s news on the bond raising, there seems little chance of the Buffexit hypothesis being practically tested any time soon. Berkshire Hathaway\u2019s issuance of $4bn of bonds back in September 2019 began a process through which it built stakes of just over 5 per cent in each of Japan\u2019s five largest trading houses by the following August.<\/p>\n<p>Whenever it has issued new yen bonds since then (the latest was a $1.1bn raising in April), it has used the proceeds to expand its holdings in just those same five companies beyond 8 per cent. The chances of it doing the same again \u2014 and of ignoring the other 3,500-odd stocks in Japan \u2014 seem high.<\/p>\n<p>As a statement of confidence and ambition, Berkshire\u2019s even-handed investment in Mitsubishi, Mitsui, Marubeni, Sumitomo and Itochu was remarkable for many reasons, not least because it was Buffett\u2019s first serious foray into Japan and because, at the time, it was a stunningly contrarian call.<\/p>\n<p>At the point where Berkshire began building the trading house stakes, global investors were nearing the end of a 32-month phase in which they had offloaded an unprecedented $132bn of\u00a0Japanese stocks and apparently felt zero fear of missing out in doing so. The once market-boosting \u201cAbenomics\u201d story, in which investors bet on both the Bank of Japan\u2019s policy support and the late prime minister Shinzo Abe\u2019s reforms, had ended and there was no obvious new bestseller to take its place.<\/p>\n<p>The mid-2020, mid-pandemic disclosure of Buffett\u2019s bet proved extremely powerful. Japan\u2019s five biggest trading houses are arguably the best equity proxies for the strength of corporate Japan as a whole, its dealmaking appetite and its willingness to expand globally. And here was Buffett betting large on them as both a collective engine of profit and, by implication given his historic focus as an investor, on their skills as managers.<\/p>\n<p>Votes of confidence, however small a portion of Berkshire\u2019s overall portfolio Japan represents, do not come more comprehensive. The five stocks soared on the disclosure of the identity of their new largest shareholder, and since August 2020 have all risen between 100 per cent (Itochu) and 250 per cent (Marubeni).<\/p>\n<p>But the secondary effect of Buffett\u2019s bet has been to anchor the still functioning \u201cbuy Japan\u201d narrative that has pushed the Topix index roughly 43 per cent higher over the three years since he declared his investment.<\/p>\n<p>Japanese equities have delivered 30 years of false dawns, but there is now a genuine hunger among global investors for evidence that this time is different and that Japan is investable as a long-term alternative to China. Berkshire has, to a significant extent, satisfied some of that hunger. Buffett\u2019s stockpicking may be highly selective and perhaps inimitable, but it proves that you can come to Japan and win.<\/p>\n<p>What are the chances that Buffett could sharply reduce his stakes in the trading houses, take the sizeable profit he has made (even with the currency hit) and say farewell to Japan? He was a contrarian on the way in, so, given that the Tokyo market is one of the world\u2019s best performers this year, why not on the way out?<\/p>\n<p>The answer, probably, is that he will stay. But the Buffett horizon question remains exactly the one investors still prevaricating on Japan should be asking. If they believe that word of Buffett\u2019s retreat would cause a week of serious turmoil across the market, followed by a shrug and a fairly robust return to trend shortly afterwards, then they should buy Japan. If they judge, despite fundamentals, that the whole solidity of the market depends on the continued presence of a 93-year-old man\u2019s investment company, they should not.<\/p>\n<p><em>leo.lewis@ft.com<\/em><\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.ft.com\/content\/446bf09b-8cca-4f24-8ab4-b51bdcfeb93b\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Stay informed with free updates Simply sign up to the Japanese business &amp; finance myFT Digest &#8212; delivered directly to your inbox&#8230;.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[22],"tags":[],"class_list":{"0":"post-11478","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-business"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.3 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Can Japan ever pass the \u2018Buffett horizon\u2019? 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