The article below explains that the sell-off in global bond markets has calmed down slightly, but investors remain cautious about government bonds due to factors such as rising oil prices and inflationary pressures.
In Japan, interest rates have risen exceptionally high because the country is dependent on imported energy, and also because government support measures could increase national debt. This further increases pressure on the country’s central bank to raise rates.
“The war – and in particular the government’s decision to cap energy prices – has clearly exacerbated those. We estimate that an oil price of ~$130 (per barrel) over the rest of the year, for example, would cost the government about 2% of GDP. That probably means the risk of a lot more issuance, as hinted at by PM Takaichi’s recent talk of a supplementary budget. So, perhaps it’s not surprising that long-dated yields have risen and those at the ’superlong’ end have risen even more, partly undoing their relative fall since mid-2025,” Mathews noted.
Japan has been an attractive investment destination for Berkshire Hathaway for a while now.
Buffett and Abel have made major investments in trading houses, and now in March, Berkshire’s insurance operations began collaborating with the insurance company Tokio Marine. Ajit Jain is a key figure in this cooperative arrangement. At the same time, Berkshire purchased approximately a 2.5% stake in the company and reserves the option to increase that stake up to 9.9% (as was the case with the other companies initially, though those holdings have now slightly exceeded that level).
I am not sure if other large Western investors are as actively involved in the Japanese market (excluding index funds, which primarily hold stocks passively). In any case, it is interesting to follow and participate in this market. At the same time, the shares of companies owned by Berkshire have overall performed very well.
Here is a fresh list of Berkshire’s holdings in Japan:
The tweet below highlights that Japan has sold a significant amount of US Treasuries because the war in Iran has pushed up oil prices and inflationary pressures.
An increase in interest rates would naturally be difficult for Japan due to its large debt burden, so the country is seeking liquidity by selling off its investments.
The importance of Japan in Berkshire’s equity portfolio has grown significantly alongside the growth of their Japanese investments. Japan’s share is already 14% of Berkshire’s total equity portfolio ($45.7 / $330.8 billion).
This is quite a “statement,” and furthermore, cooperation between companies (Tokio Marine / Berkshire) is now being launched in the insurance business, which further deepens Berkshire’s Japanese dimension.
I’m not sure which thread this discussion belongs to better, so I’ll link to both; however, this is concretely within the theme of “Japan as an investment destination” using practical examples.
One more practical observation regarding investing in Japan:
The Tokyo Stock Exchange uses trading units (lot sizes), typically 100 shares. This means that you cannot fine-tune your positions extensively with smaller sums of money.
For example, the trading unit for Tokio Marine is approximately 4,000 euros, meaning investments are made in increments of about 4,000 euros. This is important to keep in mind when planning purchases on the Tokyo Stock Exchange.
Some slightly better economic data has come out of Japan.
Industrial production grew contrary to expectations; furthermore, retail sales performed better than anticipated, even though energy and living costs continue to weigh on the economy. Semiconductor equipment, in particular, supported production.
According to the article, these fresh figures could provide the Bank of Japan with more grounds to consider an interest rate hike.
The figures come as the Bank of Japan weighs further interest rate hikes. Resilient domestic demand and improving factory activity could support the central bank’s case for another hike next month.
In Japan, interest rates have risen exceptionally high because, according to the article, investors fear the national debt will grow even further.
The government wants to support people with rising energy and daily living costs, but it is generally not believed that such additional funds could be found without taking on new debt. Equities are still performing better than the yen and government bonds.
Key Points
Japan’s government is preparing a supplementary budget of around 3 trillion yen, or about $19 billion, to replenish reserves and fund fuel and utility subsidies amid higher energy costs.
Takaichi has said overall bond issuance will remain unchanged, even though the extra spending will be financed with deficit-covering bonds.
It might be difficult to have that budget without issuing more debt, experts say.
Japan’s manufacturing output continued to grow rapidly in May, driven by strong demand for new orders—particularly exports and microchips.
Factories also produced goods for inventory as unrest in the Middle East complicates deliveries. At the same time, the prices of raw materials, labor, and transportation rose sharply. This pushed factories’ own costs to higher-than-normal levels, which was simultaneously reflected in an increase in product selling prices.
Japanese inflation is slowing down significantly again according to this tweet.
Price trends in Tokyo suggest that inflation for the entire country may also stabilize. For instance, price pressures from food, energy, and water utilities have eased, which nonetheless makes the Bank of Japan’s situation tricky regarding interest rate decisions.
The Bank of Japan hints that a rate hike could occur in the middle of the month.
The markets generally consider a rate hike to be very likely, but according to the article, the situation remains difficult as some economic figures appear to be weakening.
Japan’s economy grew by 1.8 percent in the first quarter. However, growth was softer than preliminary estimates (2.1%), influenced by reduced corporate investment and economic uncertainty caused by the war in the Middle East, as well as expensive energy.
The Middle East war remained a major point of uncertainty, as energy prices remained high and threatened to underpin inflation in the coming months.
Still, Japan’s economy was underpinned by some strength in private consumption and export demand in Q1. But the Middle East war, which entered its fourth straight month in June, largely clouded the economic outlook.
The article below reports that the Bank of Japan is expected to raise its policy rate to one percent at its meeting in mid-June.
The markets have already priced in this tightening, so attention is shifting to the timeline of future decisions. Bank of America predicts that rate hikes will continue moderately until next year, but unexpectedly high inflation may force the bank to act even faster, which would also be reflected in the yen’s exchange rate.
