Berkshire Hathaway, owned by Warren Buffett, recently conducted its second yen bond issuance of the year, selling yen bonds at a lower cost. Some speculate that this legendary investment guru may invest more funds in Japanese stocks.
This time, Berkshire Hathaway issued five different tenors of yen bonds, ranging from 3 years to 35 years, with a total value of 122 billion yen (approximately 1 billion US dollars), and the spread narrowed compared to the previous issuance.
Among them, the 3-year yen bond was priced at a premium of 59 basis points to the swap bond, lower than the 75 basis points in April, when the appointment of the Bank of Japan Governor and the crisis in the European and American banking industry caused market turmoil.
Berkshire Hathaway is one of the largest overseas issuers of yen bonds, and has chosen yen in 32 out of its past 40 bond issuances. Buffett himself is also an active investor in Japanese stocks: in June, he announced an increase in holdings of the five major Japanese trading companies, including Mitsubishi and Itochu, driving Japanese stocks to their highest level in 33 years.
An analyst at Daiwa Securities wrote earlier this month that Buffett may be targeting Japanese banks, insurance companies, and automakers as his next investment targets.
Compared with the April issuance, the coupon rate of Berkshire Hathaway bonds has been slightly increased, but the increase is smaller than the reference swap rate, so the spread has narrowed.
Most economists expect the Bank of Japan to change its ultra-loose monetary policy around April next year, although Governor Kuroda has indicated that the policy shift will be gradual. In addition, Japanese bond yields have fallen from recent highs in the past few trading days.
According to the latest media reports, a fund manager at an asset management company stated that despite the expected increase in future interest rates, Berkshire Hathaway's 3-year bonds with a coupon rate of nearly 1% are still attractive. He affirmed Berkshire Hathaway's ability to successfully issue approximately 1.2 trillion yen in bonds in the current market environment.
Even though the Bank of Japan relaxed the upper limit control on 10-year government bond yields last month, yen bond issuances from foreign issuers remain strong. Overseas companies and governments, including some emerging market countries, are taking advantage of Japan's relatively low funding costs for bond financing.
A credit research director stated that he has never seen so many foreign issuers visiting Japan. Just this week, he has met with at least 7-8 potential bond issuers. He analyzed that this is because Japanese interest rates are relatively stable, allowing issuers to finance at lower costs.
For overseas issuers like Berkshire Hathaway who invest in yen-denominated assets, issuing yen bonds can avoid currency conversion costs. Since April this year, the issuance of yen bonds has increased by over 50% YoY, reaching approximately 2.5 trillion yen, the highest in nearly 5 years.

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Buffett may be considering Japanese banks, insurance companies, and automakers as his next investment targets.

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Should we continue to buy Japanese stocks? Berkshire Hathaway has issued yen bonds for the second time this year, with a total value of 122 billion yen.