Berkshire CEO Greg Abel says Japanese bond yields not a challenge for trading houses right now

Berkshire Hathaway CEO Greg Abel said rising Japanese bond yields are not currently undermining the country’s major trading houses, in which Berkshire has substantial investments. Speaking Wednesday on CNBC’s “Squawk Box,” Abel said Japan’s 10-year bond yield had reached a 30-year high during another global bond-market sell-off. However, he said none of the trading companies had identified higher yields as a fundamental challenge. Japan’s 10-year yield is just above 3%, while the U.S. 10-year Treasury yield crossed 4.8% on Tuesday, reaching an almost three-year high. Abel said Japanese yields remain relatively modest compared with bond yields elsewhere, making the situation manageable for the companies. Berkshire owns more than 10% of each of Japan’s five largest trading houses: Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo. Their businesses span areas including energy and consumer goods. Abel was visiting Tokyo to meet with the five companies and review Berkshire’s other investments in Japan. He said Berkshire expects to continue raising debt in yen when appropriate, despite higher yields. That indicates the company retains flexibility to use yen funding while monitoring borrowing costs. The stakes were initially built under Berkshire’s promise not to exceed a double-digit ownership level in any of the five companies. Abel said Berkshire received permission from each trading house to move above 10%, six years after making the initial investments. Berkshire continues to see value in the holdings, which have produced strong returns as the companies’ shares rose substantially since the original investment. Abel described the positions as long-term investments Berkshire intends to hold for many decades. He also highlighted strong relationships with each company and discussions about additional opportunities in Japan and abroad.