WARREN BUFFETT INVESTMENT STRATEGY IN JAPAN

Warren Buffett's investment strategy in Japan, primarily through Berkshire Hathaway, has been notable for its "arbitrage" of ultra-low Japanese interest rates. Berkshire has been borrowing significant amounts of yen, often at rates well below 1% (sometimes even around 0.5% as mentioned in the prompt), by issuing yen-denominated bonds. This low-cost financing allows Buffett to invest in Japanese companies while effectively hedging currency risk, as both the debt and the underlying investments are in yen. The intention is to profit from the spread between the low borrowing cost and the returns generated by the investments.
The core of this investment has been in five major Japanese trading companies: Itochu, Marubeni, Mitsubishi, Mitsui & Co., and Sumitomo. These diversified conglomerates, deeply embedded in global supply chains, appeal to Buffett due to their strong business models, healthy cash flows, and shareholder-friendly policies, including consistent dividend increases and share repurchases. While the prompt suggests a dividend of 8%, typical dividend yields for these companies might vary, but they are generally considered attractive. Beyond dividends, Buffett also stands to gain from capital appreciation as these companies' stock prices rise, driven by their operational performance and the general re-rating of Japanese equities. This long-term approach, coupled with the favorable borrowing terms, positions Berkshire Hathaway to potentially achieve substantial returns.

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