In some ways Japan and Mr Buffett are a match made in heaven. Mr Buffett is famed for his unerring focus on business fundamentals. Even after a recent sell-off in American stocks the broad Tokyo market is still far cheaper. Its price-to-earnings ratio is around 13, compared with 18 in America. The trading firms Berkshire Hathaway has invested in—known in Japan as—are often seen as stodgy and reliable. All have price-to-earnings ratios of below ten and pay healthy dividends.
The company is not borrowing because it is short of cash. Rather, the trade reveals the advantages of currency hedging. Borrowing as well as buying in yen protects Mr Buffett from falls in the currency’s value. And as a result of the gulf in interest rates between America and Japan, he can finance his investments using long-term loans charging less than 2% annually, while keeping his spare cash at home invested in government bonds earning almost 5%.