Hey, those familiar with Japan. What kind of potential/risks do you see in investing in Japanese companies at this point? It’s been a while since the big players have been talking about potential excess returns from there. I’ve had the intention to invest in that market for a couple of years now, but for one reason or another, I’ve always put it off. How do you see, for example, these interest rate hikes or the weakness of the yen and Japan’s possible desire to strengthen it?
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This doesn’t seem to be the best metric to compare economies right now. The record-low Japanese yen has depressed the value of the economy in the dollar-denominated global economy. A return to the long-term average, i.e., USD=110 JPY, would raise the GDP per capita figure back to 46,000, which no Eastern European country will reach before 2050. Your writing is quite misleading, because with your logic, we would have achieved Sweden’s standard of living in Finland, even though in reality the value of the krona has only weakened.
EDIT: My calculation is based on today’s exchange rate; I don’t know what exchange rate was used for the Wikipedia article.
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I don’t have time to write more extensive justifications here now (perhaps another time). I would say that the portfolio should have a 5-10% weighting. Currently, Tokyo is discounted due to customs turmoil (the yen’s exchange rate is also sensitive to fluctuations and the US economy, which creates buying opportunities). I would say that the Nikkei index value should be around 41000 at the moment.
The economy is driven by exports aided by a weak yen, as well as two years of continuous wage increases, which are the largest since the late 1980s. Rising real wages and increasing tourist numbers benefit the service sector. Q4 2024 results were good, with 2.8% annual economic growth.
In Japan, it is said that the lost years are finally over, with interest rates, wages, and the economy rising.
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Japan’s central bank is expected to cut its economic growth forecast at its late April meeting, according to the story below.
U.S. President Donald Trump’s tariff policy adds pressure on the country’s export-driven economy. Interest rate hikes are unlikely to continue in the near future; although tariffs are slowing growth, the central bank estimates they are not yet enough to undermine the inflation target.
Governor Kazuo Ueda has stated that monetary policy can be adjusted according to the situation.
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Slightly repetitive, Japan’s exports grew only slightly in March and missed expectations, partially due to the impact of new US tariffs. Exports to the United States rose moderately, but overall export growth slowed significantly compared to February. Japan’s position as an export engine has weakened, and in addition, China’s oversupply may increase pressure in the future.
"Key Points
- Japan exports growth declined to a 3.9%, down from February’s 11.4% jump.
- March data includes the impact of steel and aluminum tariffs from the U.S., but does not include the impact of auto tariffs.
- Exports to the U.S., Japan’s second-largest trading partner, saw a 3.1% rise."
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Japan’s inflation rose to 3.6 percent in March, exceeding the central bank’s 2 percent target for the third consecutive year, even though inflation can support interest rate hikes.
U.S. tariffs weigh on GDP outlook and limit the Bank of Japan’s room for maneuver. Nomura expects only one interest rate hike by 2027.
"Key Points
- Japan’s inflation grew 3.6% year on year in March, marking three straight years that the headline inflation figure is above the Bank of Japan’s 2% target.
- The data release comes as Japan is locked in trade talks with the U.S., with U.S. President Donald Trump writing that “big progress” has been made."
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Verneri’s Thursday Quarter-Hour offers good reflection on Japan’s opportunities and challenges 
P/E ratios look attractive even though Nikkei’s development has been favorable in recent years. A rise in valuation multiples could offer good potential. Of course, Japan is certainly also sensitive to the various turns of the trade war. A small slice of Nikkei through an ETF could certainly be appealing.
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Japan is considering increasing soybean and rice imports as a concession in negotiations with the United States due to tariffs. The USA is demanding more meat, fish, and potatoes from Japan, and Trump has also criticized Japan’s rice tariff. Japan has already increased rice imports as domestic prices rise.
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Japanin pörssi pyrkii houkuttelemaan piensijoittajia laskemalla osakkeiden minimisijoitusrajoja.
Tavoitteena on aktivoida kotitalouksien säästämistä ja nuorten sijoittamista, mikä tukisi Japanin taloutta.
"Key Points
- Japan’s Tokyo Stock Exchange is asking listed companies to reduce their minimum investment thresholds to attract smaller retail investments.
- “TSE will create an environment that is conducive to investment for a diverse range of individuals, including young people,” the report said."
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Japanese Prime Minister Shigeru Ishiba has announced urgent economic measures to support businesses and households… against the impact of new US tariffs.
The measures include subsidies to lower fuel prices and partially cover electricity bills, as well as low-interest loans for small and medium-sized enterprises.
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Below is a story about how the United States and Japan are starting trade negotiations, but the countries’ views differ.
The United States emphasized the importance of tariffs and economic security, while Japan was skeptical about the prospects for progress, and as previously stated, tariffs targeting the automotive industry, in particular, raised concerns in Japan.
Three of the seven major Japanese trading houses predict their profits will decline by 2026, the reason, of course, being the uncertainty caused by Trump’s tariff policy. The other four expect profit growth, but believe tariffs will still significantly reduce their earnings. Leaders fear a global recession.
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Japan is considering selling some of its U.S. government bonds as a negotiation tactic.
According to the story, this could affect global markets and the U.S. economy. Experts warn that the move would be a double-edged sword, potentially harming Japan’s economy at the same time.
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The article below describes how Japan has consistently strengthened its economic security since 2020.
The country has collaborated with businesses, reformed its administration, and enacted a law that secures critical materials, infrastructure, and technologies. According to the article, Japan serves as an example for others in developing economic security.
The same year, Japan passed the Economic Security Promotion Act (ESPA) with the aim of promoting Japan’s economic security by ensuring its strategic autonomy and indispensability. The legislation has four pillars:
- ensuring a stable supply of specific critical materials,
- securing the stable provision of critical infrastructure,
- supporting the development of specific critical technologies, and
- implementing a secret patent system.
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In Japan, real wages fell by 2.1 percent in March, marking the third consecutive month due to inflation.
According to the report, however, consumption surprised positively and grew more than expected. Analysts expect wages to continue improving, but fear that tariffs, on the other hand, could slow down the development.
- Japan March real wages fall 2.1% year-on-year
- March household spending beats forecasts
- Analysts see real wages improving, but fear tariffs could spoil pay hikes
- Government sees signs of consumer recovery, but remains cautious
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Aiheeseen “Japani sijoituskohteena” pitkä postaus - tässä transkripti Buffetin ja Abelin vastauksesta osakkeenomistajan kysymykseen Berkshiren Japani-sijoituksista (yhtiökokous 2025). Buffett mieluusti investoisi enemmänkin rahaa maahan mutta Berkshiren valtava koko tuottaa ongelmia.
Warren Buffett: Well, I’m going to extend the same goodwill to Japan that you’ve just extended to me. I’ll let the people of Japan determine their best course of action in terms of economics. It’s an incredible story.
It’s been about six years now since our Japanese investments. I was just going through a little handbook that probably had two or three thousand Japanese companies in it. One problem I have is that I can’t read that handbook anymore – the print’s too small. But there were these five trading companies selling at ridiculously low prices. So I spent about a year acquiring them. And then we got to know the people better, and everything that Greg and I saw, we liked better as we went along.
So we got fairly close to the 10% limit that we told the companies we would never exceed without their permission. We did ask them whether that limit could be relaxed, and it’s in the process of being relaxed somewhat. I would say that – I’ll speak for Greg beyond me – in the next 50 years, we won’t give a thought to selling those positions.
Japan’s record has been extraordinary. My guess is that Tim Cook would tell you that iPhone sales there are about as great as any country outside the United States. American Express would tell you that they sell their product very well in Japan. Coca-Cola, another big investment of ours, does extraordinarily well in Japan. They have a number of habits and a civilization that operates differently than ours. Japan is by far the biggest market for Coca-Cola’s soft drink containers.
We have been treated extremely well by the five companies. They talk primarily with Greg. I went over there a year or two ago, but Greg’s more cosmopolitan than I am.
Greg Abel: When you think of the five companies, there’s definitely a couple meetings a year, Warren. The thing we’re building with the five companies is, one, it’s been a very good investment, but we really envision holding the investment for 50 years or forever. We also are building relationships to do incremental things with each of those companies. We really hope to do big things with them globally. They bring different perspectives and different opportunities, and that’s why we’re building that long-term relationship with them.
(Buffett:) They have different customs, different approaches to business – that’s true around the world. We don’t have any intention of trying to change what they’ve done because they do it very successfully. Our main activity is just to cheer and clap, and I can still do that at 94.
We will not be selling any stock. That will not happen in decades, if then. My guess is that they will find things – they cover the world pretty much – and we will find opportunities that may be very large for any individual company there. They may be assisted by some help we bring to the situation, but that will be an expanding relationship.
It’s too bad that Berkshire has gotten as big as it is because we love that position and I’d like it to be a lot larger. Even with the five companies being very large in Japan, we’ve got at market in the range of $20 billion invested, but I’d rather have $100 billion than $20 billion. That’s how I feel about several other investments we have. But size is an enemy of performance at Berkshire, and I don’t know any good way to solve that problem.
Charlie always told me that having a few problems was good for me. The Japan investment has just been right up our alley.
Greg Abel: I absolutely agree, Warren. I do believe we’ll see some very large opportunities long term, and that’s just been a great plus of that relationship.
Warren Buffett: I would say they want to present us with opportunities, and we would like to receive them. We’ve got the money. We get along very well with each other. They have some different customs than we have. They drink Georgia coffee as their number one Coca-Cola product. I haven’t converted them to Cherry Coke, and they’re not going to convert me to Georgia Coffee. But it’s a perfect relationship. I just wish we could get more like it.
I never dreamt of that when I picked up that handbook. It’s amazing what you can find when you just turn the page. We showed a movie last year about “turn every page,” and I would say that turning every page is one important ingredient to bring to the investment field. Very few people do turn every page, and the ones who turn every page aren’t going to tell you what they’re finding. So you’ve got to do a little of it yourself.
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According to the article below, the US-UK customs agreement does not help Japan in its own negotiations, as the starting points of the countries are very different in many ways.
The United States granted Britain concessions, for example, on car import quotas, but maintains a stricter line towards many other countries, such as Japan.
Negotiations with Japan are therefore still ongoing, and no consensus has even been reached on the topics of negotiation.
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The news below reports how South Korean presidential candidate Lee Jae-myung, traditionally known for his Japan-critical stance, surprised by promising to strengthen economic cooperation with Japan. He even supports a free trade agreement, which would be a change from the Democrats’ previous stance.
Lee justifies the change with the need to respond to US protectionism and China’s influence.
However, during a series of interviews with Western media earlier this year, Lee said Japan’s enhanced defense capabilities do not threaten Korea and claimed his party has pursued a “pragmatic” approach.
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The tweet below highlights that Japan’s economy contracted more than expected in the early part of the year, for the first time in about a year.
The figures do not even yet include the effects of tariffs that came into force in April. A recession is looming.
https://x.com/KobeissiLetter/status/1923179591755293100
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Japan’s economy contracted by 0.2 percent in January–March, which was more than the expected 0.1 percent decline. On an annual basis, however, the gross domestic product grew by 1.7 percent, which was the best result since the beginning of 2023. The contraction was primarily due to a 0.6 percent decrease in exports, even though domestic demand grew by 0.6 percent.
The economic figures were released at the same time as Japan is still conducting, so far unsuccessful, trade negotiations with the United States.
Experts estimate that exports may remain weak, but domestic consumption will continue to support growth. However, the Bank of Japan warns of ongoing risks and expects a moderate recovery.
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The tweet states that Japan’s economic situation is worsening, for example, GDP is contracting again, and the interest rate on 40-year government bonds is at its highest in over 20 years.
The Prime Minister describes the situation as worse than even Greece.
https://x.com/KobeissiLetter/status/1924298584091930901
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