Source: Smart Investors
On September 2, Greg Abel was in Tokyo.
This marked a significant trip to Japan following his assumption of the role of CEO at Berkshire Hathaway.
Over the course of several days, he first visited Fukushima to inspect Tungaloy, an industrial cutting tool manufacturer acquired by Berkshire in 2008. He then returned to Tokyo to meet individually with executives from Japan’s five major trading houses.
On the morning of his interview with CNBC host Becky Quick, he even placed a call to Warren Buffett in Omaha to provide detailed updates on the discussions held and the operational performance of the five companies.
Buffett had just celebrated his 96th birthday on August 30, and Abel made a special effort to attend the birthday gathering before flying to Tokyo.
"Warren is very fond of our investments in Japan," Abel said with a smile, noting that the two even discussed the five major trading houses on Buffett's birthday.
Although Buffett no longer serves as CEO, this latest interaction suggests he continues to play a role in Berkshire’s capital allocation that extends beyond that of a mere advisor.
This is particularly evident in the most closely watched recent investment: Google.
Berkshire’s latest 13F filing shows that, as of the end of June 2026, its disclosed U.S. equity portfolio totaled approximately $299.3 billion. $Apple (AAPL.US)$ It remains the largest holding, with a market value of approximately $66 billion; $American Express (AXP.US)$ Approximately USD 51.3 billion; while $Alphabet-A (GOOGL.US)$ and $Alphabet-C (GOOG.US)$ the total holdings have approached 106 million shares, with a market value of approximately USD 37.8 billion, making it the third-largest U.S. equity position.
This investment was once regarded by external observers as a hallmark of the "Able Era": Berkshire Hathaway, renowned for its traditional value investing approach, suddenly made a significant purchase in one of the most important technology companies of the AI era after the new CEO took office.
However, in a July interview, Buffett revealed that he initiated this investment himself. He also emphasized that although Able now makes the final decisions, the two of them "talk every day," stating, "I will not do anything he disagrees with, and he will not do anything I disagree with."
This time, Able filled in more parts of the story.
Buffett began buying the initial tranche of Google shares approximately 15 months ago. By the end of May this year, Able received a call offering Berkshire an opportunity for a block subscription.
He immediately called Buffett. The two discussed both the scale and the price. Ultimately, Able recommended acquiring USD 10 billion worth of shares and requested a 6.5% discount relative to the market price.
As for the rationale behind the purchase, Able's explanation was very much in line with Berkshire's philosophy: with so many physical businesses under its umbrella actually using AI, Berkshire can directly observe whether AI truly improves efficiency and how much tangible benefit it brings.
They simultaneously recognized that "Google would be one of the key players."
The investment in Japan represents another, longer-term storyline.
Six years ago, when Berkshire Hathaway first disclosed its stakes in the five major Japanese trading houses, its holdings in each were only around 5%; today, they have all exceeded 10%. Warren Buffett and Greg Abel have stated on multiple occasions that Berkshire intends to hold these stocks for the long term.
Looking back, the yen-denominated financing arranged to support this investment at the time is even more intriguing.
In 2019, Berkshire Hathaway issued JPY 430 billion in bonds for the first time on a large scale. The tranche maturing in 2029 carried a coupon of just 0.44%, while the 30-year bond had a yield of only 1.108%. Today, the yield on Japan’s 10-year government bonds has risen to approximately 3%.
This strategy appears even more astute considering that Buffett used low-cost yen-denominated liabilities to match long-term yen-denominated assets.
Berkshire still holds over USD 15 billion in yen-denominated debt, while the dividends contributed by the five major trading houses remain significantly higher than the financing interest costs. Abel indicated that Berkshire would continue to issue yen-denominated bonds as long as conditions remain favorable.
The discussion also covered the strategic partnership between Berkshire and Tokio Marine, growth opportunities in data centers, and other topics.
Smart Investor has carefully translated and compiled this content for our readers.
01. Regarding Japan’s Five Major Trading Houses
Quick: Greg, let’s start by discussing your recent trip to Japan. Why did you choose to visit Japan at this time, and what have you been primarily doing over the past few days?
Abel: This trip actually served several important purposes.
Upon arriving in Japan, my first stop was Tungaloy, a long-established Japanese manufacturer of cemented carbide cutting tools, which belongs to IMC (International Metalworking Companies), one of the world’s leading metal cutting tool groups under Berkshire Hathaway.
I spent an afternoon in Fukushima with the local team. The story of this company is quite remarkable.
We acquired it in 2008. At the time, it had just spun off from the Toshiba group and was relatively small in scale. Over the years, we have essentially rebuilt the company step by step.
Tungaloy has several important factories in Fukushima, so I spent considerable time visiting them during this trip. The company currently employs approximately 1,500 people in Japan.
Its annual domestic sales in Japan are less than $240 million, with overseas sales amounting to approximately $400 million. Although the team is not particularly large, its performance has been outstanding.
Therefore, starting my trip to Japan in this manner was very rewarding for me.
Of course, in the following days, I also visited each of the five major Japanese trading houses in Tokyo.
Abel: Your initial investment in these five major trading houses was made six years ago.
I recall that when Berkshire Hathaway first disclosed this investment, its stake in each company was only around 5%. At that time, you and Warren Buffett had an agreement with them that Berkshire would not increase its ownership above 9.9% without the companies' consent.
Over the years, I believe the five major trading houses have welcomed Berkshire as a long-term shareholder. Currently, your stake in each company exceeds 10%, partly due to their ongoing share buyback programs.
So, my question is: What is your long-term plan for these holdings? What kind of relationship has developed between Berkshire Hathaway and the five major trading houses?
Abel: You are correct. This story indeed begins six years ago.
We announced this investment on Warren Buffett’s 90th birthday in U.S. time, which was the following day in Japan time. At that time, Berkshire Hathaway’s stake in each of the five major trading houses had just exceeded 5%.
From the outset, we made it very clear that this is a long-term investment. We intend to hold these positions for the long haul and hope to build deeper relationships with the five companies over time.
Three years later, in 2023, we traveled to Tokyo and met with each of the five companies separately. That visit itself was part of our ongoing efforts to strengthen these relationships.
By that time, we were already highly satisfied with the investment. Berkshire Hathaway’s stake in each company had surpassed 7%, and the businesses themselves were performing well.
As you mentioned earlier, their capital allocation has been excellent: they have consistently repurchased shares and increased dividends, while their operational performance has continued to improve.
Subsequently, we did approach the five companies to seek their approval for Berkshire Hathaway to increase its ownership stakes to above 10%.
We had previously committed to keeping our stakes below 10%, and we would only exceed this threshold with the consent of all five companies.
Only after receiving such approval did our ownership stakes gradually rise above 10%.
Therefore, for us: first, this remains a long-term investment intended to be held for decades; second, our relationships with the five companies continue to deepen, and we are jointly exploring new cooperation opportunities not only in Japan but also in markets beyond Japan.
With each visit to Japan, we continue the discussions from our previous meetings to identify new areas where we can collaborate.
Our relationship with the five major trading houses has evolved beyond that of a simple shareholder and investee; we are progressively establishing a genuine, long-term commercial partnership.
02. Regarding Tokio Marine Holdings
Quick: I would like to ask a follow-up question regarding this partnership.
This year, Berkshire also invested in Tokio Marine Holdings, a large, historic comprehensive insurance group in Japan.
Recent reports indicate that Tokio Marine is seeking new large-scale acquisition opportunities, including Suncorp Group, a major Australian insurance conglomerate, and Intact Financial Corporation, a leading Canadian insurer specializing in property and casualty insurance.
The reports further suggest that should such acquisitions proceed, Berkshire may leverage its balance sheet to provide support to Tokio Marine.
Could you discuss whether similar transactions are currently under discussion between the two parties? If Tokio Marine were to pursue a major acquisition, would Berkshire potentially provide financial support?
Abel: To address this, let me start by outlining our current partnership with Tokio Marine.
Just prior to Berkshire's annual shareholders' meeting this year, we announced our collaboration with Tokio Marine.
For us, this represents an excellent opportunity, as Tokio Marine is an outstanding partner. We are delighted to have successfully reached an agreement with them.
The collaboration broadly consists of several components.
First, in the area of reinsurance, we participate in the quota share reinsurance of certain insurance businesses underwritten by Tokio Marine, assuming a 2.5% share.
Meanwhile, Berkshire holds approximately a 2.5% equity stake in Tokio Marine, and the two parties have formally established a strategic partnership.
However, I would like to emphasize that the scope of this "strategic partnership" is actually quite broad.
Both parties may bring new ideas, investment opportunities, or potential transactions to the table for discussion, but neither party is obligated to participate.
If an opportunity makes sense for both Tokio Marine and Berkshire, we are certainly very willing to collaborate with them.
Regarding the specific potential acquisition targets you mentioned earlier, as you know, we do not comment on individual companies.
03. Regarding Japanese Bond Financing
When Berkshire began investing in the five major Japanese trading houses, it also undertook another significant initiative: issuing yen-denominated bonds in Japan.
Given that Japan has maintained a low-interest-rate environment in recent years, this should represent a rather cost-effective financing arrangement for Berkshire.
However, the situation is changing. Just this morning, we were discussing how the yield on Japan’s 10-year government bonds has risen to its highest level in approximately 30 years.
According to Berkshire’s recently disclosed data, you currently have over USD 15 billion in yen-denominated debt.
So, what is the current status of this financing? Do you plan to continue issuing yen-denominated bonds in the future? What is the remaining maturity profile of this debt? And what does the rise in Japanese interest rates imply for Berkshire’s investment?
Abel: This is indeed a topic of widespread discussion in Tokyo and across Japan, featuring daily in the newspapers.
However, during our recent meetings with the five major trading houses, one point struck me as particularly interesting: none of the companies viewed rising interest rates as an immediate, fundamental operational challenge.
This is because, even though Japanese interest rates have risen noticeably, they remain relatively low in absolute terms.
I recall that the yield on Japan’s 10-year government bonds has just surpassed its previous high for the year.
Quick: Yes, it has reached approximately 3%.
Abel: Correct, roughly 3%. Overall, we still consider this interest rate level to be fully manageable.
From Berkshire’s perspective, your observation is accurate. We have indeed issued a substantial amount of yen-denominated bonds, and the size of this yen debt broadly matches the cost of our investments in Japan’s five major trading houses.
Currently, the weighted average remaining maturity of this debt portfolio is slightly above five years.
Therefore, even though interest rates have risen, we still maintain a substantial positive spread; that is, the dividends we receive from the five major Japanese trading houses remain significantly higher than the interest payments required on these yen-denominated debts.
Moreover, if conditions are favorable, we will continue to issue yen-denominated bonds in the future.
On the other hand, we also observe that the earnings of the five major trading houses continue to grow. In the coming years, their dividends are likely to increase further, and share buybacks will continue.
So yes, rising interest rates in Japan do mean our financing costs will increase somewhat, but at the same time, the profitability of these companies is strengthening, and the capital returned to shareholders is also increasing.
Overall, we remain very satisfied with this investment.
04. Regarding the Investment in Google
Greg, we interviewed Warren Buffett on CNBC back in July. We discussed many topics, one of which was particularly interesting: Berkshire Hathaway’s equity portfolio.
It is clear that you are now at the helm. Buffett mentioned at the time that you have the final say, though you communicate very frequently, almost daily. He specifically noted that the initial decision to build a position in Google was his.
So I would like to ask, what is your current relationship with Warren? How do you collaborate on a day-to-day basis? And how do you manage Berkshire Hathaway’s current equity portfolio?
Abel, that’s excellent. In fact, there is a prime example from just recently.
Warren just celebrated his 96th birthday last Sunday. So before I came to Tokyo, I made a special trip to visit him and celebrate with his family and friends. We spent a very pleasant afternoon together.
Afterward, I flew to Tokyo.
Warren is very fond of our investments in Japan and holds the Japanese companies we have invested in in high regard. So I could sense that he was somewhat reluctant to see me fly off to Tokyo, haha.
Nevertheless, we have always maintained an excellent working relationship. We frequently discuss many matters. Even while celebrating his birthday on Sunday, we talked about our investments in Japan.
Earlier today, I spoke with him on the phone and briefed him on these meetings, including the current operational performance of each company.
This has always been our way of interacting. We particularly enjoy discussing business matters and sharing insights derived from Berkshire’s overall investment portfolio and its subsidiaries.
As for Google, you are absolutely correct. It was indeed Warren who initiated the purchases, approximately 15 months ago, or perhaps even earlier. He acquired the initial tranche of Google shares.
Subsequently, we made several additional purchases, or more accurately, he continued to buy. We have maintained ongoing discussions regarding this company.
Then, around late May—I recall it was a Sunday morning—I received a call inquiring whether we would be interested in participating in an upcoming equity financing by Google.
At that time, the specific terms and scale had not yet been finalized.
I said, "Fine, I will get back to you shortly." This approach is very much in line with Berkshire's longstanding operating style, including our internal governance mechanisms.
I immediately called Warren. I told him, "There is a significant opportunity for us to further increase our investment in Google. This time, rather than accumulating shares gradually in the open market, we can acquire a substantial block in a single transaction."
So we began by discussing the size of the transaction.
The counterparty had not yet finalized the size at that time, but I suggested that we consider investing $10 billion.
Warren and I discussed this figure, and then we deliberated on the appropriate discount to request. I proposed a 6.5% discount to the market price, and we both agreed that these terms were acceptable.
We then returned to the counterparty and indicated that, under these terms, we were willing to take on such a large equity position. Ultimately, the deal was completed.
Quick: Why do you like Google?
Abel: Speaking at the most fundamental level (and, of course, we do not discuss the detailed rationale behind every equity investment made by Berkshire), Google has certain distinctive qualities.
In fact, the changes brought about by AI are already clearly visible across many of Berkshire's own businesses. While everyone is now witnessing and experiencing the impact of AI firsthand, we recognized early on that it would have a profound effect on the U.S. economy and corporate sector.
One of Berkshire’s advantages is that we own numerous operating businesses, allowing us to directly observe how these companies utilize AI and the tangible benefits it delivers.
These firsthand observations from our internal operations have heightened our interest in AI; at the same time, we have gained increasing clarity that Google will be a significant participant in this space.
Of course, our appreciation for Google extends well beyond this single factor, with many other reasons underpinning our view. However, this fundamental logic prompted us to conduct a thorough analysis of Google, ultimately leading to its emergence as a substantial investment for Berkshire.
5. On Data Center Construction
Quick: Following up on this topic, I would like to ask about AI and the current surge in data center construction.
You have worked in the infrastructure sector for decades, from Kiewit to Berkshire Energy, and are deeply familiar with this area. As discussions around AI infrastructure expansion intensify, energy has repeatedly been cited as a potential bottleneck.
So, what is your perspective on the current wave of data center construction? What opportunities does this present for Berkshire?
Abel: This is indeed a fascinating development right now. Every day, we see announcements of new data centers and new projects.
However, I have maintained a clear view: as data centers continue to expand on a large scale, the true bottleneck is likely to emerge in the energy sector.
It is not that we are unable to generate this electricity; power can certainly be produced.
The real issue lies in when the supporting energy infrastructure can be completed.
Once a data center project is established, how long will it take to prepare the local power infrastructure so that it truly has the capacity to supply electricity?
I still believe this will be a significant constraint. Of course, there are other challenges ahead.
However, for Berkshire, and especially for Berkshire Hathaway Energy, this remains a very significant opportunity.
For example, in Iowa, we already have numerous data centers. I recall that last year, approximately 8% of the electrical load came from data centers, and this proportion is expected to continue increasing. Customers are continuously presenting new electricity demands, and we will continue to increase power supply in areas where we have the capacity to accommodate them.
From the outset, we have adhered to several fundamental principles regarding this matter, which we have clearly communicated to every tech giant. We have also been discussing these principles with state governments, governors, and regulatory authorities.
First, while we are certainly willing to supply power to these tech giants' data centers, there is a prerequisite: other customers must not bear higher electricity prices due to these additional demands.
In fact, our requirement goes beyond merely ensuring "no harm." Our basic stance is that these projects should ultimately deliver net benefits to existing customers.
Second, local communities must fully understand the impact of data centers on water resources. However, this issue has become easier to address than in the past, as data center operators are increasingly adopting new technologies to minimize water consumption.
Finally, and very importantly, the local community itself must be willing to accept the data center.
We have always firmly believed that when a company enters a community, it should strive to become a truly welcomed member.
Of course, whether this is ultimately achieved is the responsibility of the data center operators themselves. However, we encourage them to carefully consider local community sentiment during site selection to assess whether their projects will be genuinely welcomed.
You have discussed this many times; indeed, resistance to data centers is growing in many parts of the United States.
Nevertheless, to date, none of our specific projects have been rejected on these grounds, and all ongoing projects continue to move forward with construction.
It should be clarified that when I refer to 'our projects,' I am speaking of the energy infrastructure being developed by Berkshire Hathaway, not the data centers themselves.
In any case, for these projects to proceed, they must meet the conditions I have just outlined.
Editor/rice