For over a decade, WisdomTree has treated Japan as a persistent research focus rather than a tactical overlay. Christopher Gannatti, the firm's Global Head of Research, has been central to that effort since joining in 2010, working alongside Global CIO Jeremy Schwartz. His tenure included a nearly five-year stint as head of research in London and investor meetings across Latin America, but Japan has remained a constant priority.
That long view is critical now, because the most significant signal in Japanese equities is the deliberate expansion of Berkshire Hathaway's presence in Tokyo. Warren Buffett's original Japan thesis, disclosed in his 2024 shareholder letter, centered on five trading houses accumulated since 2019. The letter confirmed strong performance and telegraphed intent. Buffett rarely writes about non-U.S. opportunities, and when he does, the signal carries disproportionate weight. “When he would mention something about anything non-US, to us, it stood out like a siren,” Gannatti said.
Earlier this year, Berkshire disclosed a stake in Tokio Marine, a Japanese insurer, at a level requiring public reporting—closer to two or three percent of the company rather than ten. Headlines focused on marine insurance exposure tied to the Strait of Hormuz, but the deeper logic runs differently. Berkshire's classic architecture is to collect insurance premiums and redeploy them into long-duration equity opportunities. “That's really what has made Berkshire into the company that it is today,” Gannatti noted, adding that historically the model operated almost entirely through U.S.-domiciled insurers. The migration of that template to Japan suggests something broader is in motion. WisdomTree expects that when Berkshire files its full 13F holdings around May 15, Tokio Marine may not stand alone.
The structural case beneath the signal is equally important. Japan trades at a persistent valuation discount to the S&P 500, historically justified by lower returns on equity and profitability. That reflects an economy oriented toward physical production rather than the asset-light, intellectual-property-driven model of U.S. technology leaders. Nvidia, Gannatti noted, designs systems and outsources manufacturing to Taiwan, keeping capital intensity low and returns on equity high. Japanese firms run the factories. “Japan is one of those economies where they are physically very good at making certain things,” he said. “They have a lot of productive capacity, productive assets, and manufacturing know-how.”
What has changed is the trajectory of shareholder returns. Despite macro risks—including energy import dependency for an island economy and geopolitical pressure from the Middle East—Japanese corporates are returning capital at an unprecedented pace. Annual buybacks run at ¥18 to ¥20 trillion alongside rising dividends. The Tokyo Stock Exchange and allied institutions have spent more than a decade rewiring corporate behavior, an agenda that began under Abenomics and continues under Prime Minister Takaichi. “There is a ring of similarity between what Takaichi stands for and what Prime Minister Abe stood for,” Gannatti said.
U.S. investors are accustomed to companies like Apple authorizing $100 billion buybacks without surprise. In Japan, “you are able to get in on the ground floor.” The result is a market where returns are driven by earnings growth rather than multiple expansion. “Investors tend to love it when the return is largely coming from growth,” Gannatti said, contrasting it with “hopes and dreams” pricing. The WisdomTree Japan Opportunities Fund (OPPJ), an ETF designed to capture this structural opportunity, currently shows an equity risk premium of 6.7 percent, against three percent for the S&P 500, even with U.S. interest rates higher than Japan's.
Foreign capital is engaging with Japan differently than in the last cycle. “In 2013, all you had to say was, are you hedging the currency? That was it,” Gannatti said. “Today, investors care about the individual stocks favored by Berkshire. They care about the stocks emphasizing shareholder yield, the buyback, the dividend.” Japan's industrial base sits at the center of that interest. The country supplies much of the precision equipment inside Taiwanese semiconductor fabs and maintains a vibrant robotics sector transitioning from repetitive tasks into AI-informed adaptive systems. “The machines in the Taiwanese factories, a lot of them come from Japan,” Gannatti noted.
OPPJ translates this governance shift into portfolio exposure systematically. The fund's methodology explicitly references companies in which Berkshire Hathaway holds a significant interest, screens for total shareholder yield, and incorporates thematic exposure across robotics, AI, and defense. “The methodology actually specifies Berkshire Hathaway,” Gannatti said. Companies issuing more shares than they retire, or declining to pay a dividend, are excluded. For advisors building a core Japan allocation, the combination of corporate reform, Berkshire's endorsement, and attractive valuations creates a compelling case for 2026. As the defense spending shift reshapes global capital allocation, Japan's industrial capabilities may offer additional tailwinds.
