Why Buffett's bet on Japan could turn on higher inflation, weakening dollar

NEW YORK: Berkshire Hathaway Inc's US$6.2 billion foray into Japan's five largest trading houses may signal billionaire Warren Buffett's expectation that inflation and a falling US dollar may make international equities more attractive when economies worldwide recover from the coronavirus pandemic.

"The inflation cocktail is being mixed and Buffett is migrating his investment to where you can create value through inflation," said Bill Smead, chief investment officer at Smead Capital Management, which invests nearly 3per cent of its assets in Berkshire."These are companies that will make more money if the price of oil any input goes up."

Expectations of dollar weakness bolster the case for US investors to own international equities if profits get a boost from the strength of the currencies they are denominated in. Jamie Rosenwald, co-founder and senior portfolio manager of Asia and Japan investments at Dalton Investments, said Buffett got a bargain"at laughably low valuations on the stock market" which show the"tremendous values available in Japan today".

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