(Oct 10): Warren Buffett’s Berkshire Hathaway Inc sold a ¥281.8 billion (US$1.89 billion or RM8.11 billion) multi-tranche bond on Thursday in a deal that’s fuelling speculation the legendary investor will increase his exposure to Japanese assets.

The firm priced a seven-part bond deal with tenors spanning three to 30 years in Berkshire’s biggest yen-denominated deal since its debut sale in 2019. All maturities except the three-year tranche offered higher premiums relative to its corresponding yen-note offering in April. 

The billionaire’s fundraising in Japan is being closely watched by equity-market investors because Buffett has used yen funds raised in the bond market to purchase holdings in Japanese companies. His stake increases in five major trading houses helped drive up the Nikkei 225 Stock Average to a record high earlier this year. Should Berkshire’s investment choices widen to other stocks such as banks, insurers and shippers, as some analysts speculate, that may lead to more gains for the Japanese market.

“The fact that the company was able to raise this much in a single year is a testament to the confidence that investors have in Berkshire,” said Haruyasu Kato, a fund manager in Tokyo at Asset Management One Co. “It is also a deal that demonstrates the strength of demand from Japanese investors for debt carrying good yields.”

The market is now focusing on what shares Buffett may buy and whether there are any stocks that meet his standards, said Mitsushige Akino, the president of Ichiyoshi Asset Management. 

That said, for foreign investors “the momentum of the appeal of Japanese stocks has passed, and it’s not like you will be left behind if you don’t buy now”, he said. Akino added that there are also benefits to investing in avenues other than Japanese stocks using funds raised in yen, thanks to cheaper costs.

The deal was a key test of investor demand for yen-denominated bonds given a shift in Bank of Japan (BOJ) policy this year away from ultra-easy rates. The wider premiums on Berkshire’s longer-tenor debt reflected investors’ caution about the outlook for interest rates. 

The 10-year part offered a spread of 82 basis points (bps) over mid swaps compared with 71 bps in April, while a 20-year note carried a premium of 91 bps versus 78 bps.

The BOJ is widely expected to hold its settings steady when it next sets policy on Oct 31, and some economists pushed back their forecasts for a year-end hike after new Prime Minister Shigeru Ishiba said last week that conditions are inappropriate for such action.

The highlight of the offering was a three-year tranche with a coupon of 1.031%, said Asset Management One’s Kato, calling it a “catchy deal”.

The average coupon offered for three-year yen bonds sold this year is around 0.865%, according to data compiled by Bloomberg.

Berkshire raised ¥155.4 billion — more than half the total amount — from that tenor. The spread of 49 bps was tighter than a comparable bond in April, reflecting strong appetite.

Buffett’s firm is a regular issuer of yen bonds, tapping the market twice annually in recent years. Here’s a look at how much Berkshire paid on some maturities:

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