Sumitomo Corporation: 400 Years of Copper, Crisis, and Commerce

Introduction & Episode Roadmap

Picture the headquarters of Sumitomo Corporation in Tokyo's Otemachi district, where executives walk past a simple emblem—a frame representing an ancient well, unchanged since 1590. This symbol connects a modern trading giant generating ¥7.29 trillion ($47.9 billion) in annual revenue to a humble copper smelting shop in feudal Kyoto. Today, Sumitomo Corporation operates with 83,327 employees across 129 locations in 66 countries and regions, with business segments spanning metal products, media and digital, transportation and construction systems, living-related and real estate, infrastructure, and mineral resources.

But here's what makes this story remarkable: How does a company trace its origins to 1590s copper smelting and still thrive in the 2020s as one of the world's largest diversified trading companies?

The central question becomes even more compelling when you consider this: Warren Buffett's Berkshire Hathaway raised its holdings in five Japanese trading houses—including Sumitomo—to stakes ranging from 8.5% to 9.8% by March 2025. Berkshire grew its stake in Sumitomo to 9.29% from 8.23%. Why did the Oracle of Omaha, who has spent a career seeking undervalued assets with durable competitive advantages, make one of his largest international bets on a Japanese trading house most Western investors cannot explain?

The Japanese names in Berkshire's portfolio—Itochu, Marubeni, Mitsubishi, Mitsui and Sumitomo—are the biggest "sogo shosha," or trading houses, in Japan that invest across diverse sectors domestically and abroad—"in a manner somewhat similar to Berkshire itself," Buffett said.

The themes we will explore cut to the heart of what makes great businesses endure: the transformation from zaibatsu to keiretsu, scandal and reinvention, the unique sōgō shōsha business model, and a value investing thesis that confounded even Warren Buffett. "The Japan investment has just been right up our alley," Buffett noted.

Understanding Sumitomo requires understanding something few Western investors grasp: a company can be 400 years old and still be a growth story. It can nearly collapse from rogue trading scandals and emerge stronger. And it can operate a business model so uniquely Japanese that even Berkshire's researchers were initially mystified by the opportunity before them.

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The Sumitomo Origin Story: Copper, Buddhism & Business Principles (1590-1868)

In 1585, a boy named Masatomo was born in Maruoka, in what is now Fukui Prefecture. Born in Maruoka in Echizen, Masatomo went to Kyoto at the age of 12, where he became a disciple of Kugen, the patriarch of Nehan-shu (Nirvana school), and received a Buddhist name, Monjuin Kakyu. For three decades, he practiced asceticism and spread his faith. But history had other plans.

The Nehan Sect was deemed by the government to be one of the sects of Tendai. Displeased with this, Masatomo left the priesthood, opening a shop for books and medicines under the name of Fujiya in Kyoto. This was around 1630, when Masatomo was in his mid-40s. The Sumitomo Group traces its roots to a bookshop in Kyoto founded circa 1615 by Masatomo Sumitomo, a former Buddhist monk. Even today, management of the group is guided by his "Founder's Precepts," written in the 17th century.

But the business foundation came from another direction entirely. Riemon Soga, Masatomo Sumitomo's brother-in-law, learned Western methods of copper refining. In 1590, he established a smelting business, Izumiya, literally meaning "spring shop." Riemon perfected techniques that allowed the extraction of silver from copper ore, something Japanese technology had not previously accomplished.

This technological breakthrough—called nanban-buki or "European squeezing"—deserves emphasis. In those days, copper refining was still in its infancy. Copper was exported without extracting all the silver from the ore, granting the importers additional profit. Riemon learned from Europeans how to separate silver from copper, using lead. After long striving he managed to complete his copper refining technique. Japan was essentially giving away silver embedded in copper exports. Riemon's innovation captured that value domestically.

The families merged through marriage: Riemon became close to Masatomo first through a family connection—he married Masatomo's sister—and then through faith. Riemon's son, Tomomochi, later assumed the Sumitomo family name when he was adopted through marriage with Masatomo's daughter, bringing the two families together into one. Tomomochi is the man who built the House of Sumitomo into a major merchant house.

What did the Buddhist monk-turned-merchant leave behind? Masatomo Sumitomo wrote the Monjuin Shiigaki, known as the Founder's Precepts, toward the end of his life to offer guidance on how a merchant should conduct business. Rather than offering a set of principles explicitly focused on the continuity and development of the House of Sumitomo's business, the Monjuin Shiigaki consists of guidelines pointing out the overriding importance of diligence and integrity in everything that a person undertakes.

"Do your best prudently and meticulously, not only in business, but also in every aspect of your life. If items are offered to you at prices lower than the market prices, assume they are stolen goods unless their origin is known. Do not put anyone up for the night or accept anyone's request to look after his belongings."

These precepts may seem quaint. But consider: a 400-year-old company still operating under the same founder's philosophy is extraordinarily rare. The teachings of Masatomo may be summarized as follows: always keep the principal virtues of "honesty, mercy and purity" in mind, respect the gods and Buddha, act with prudence and discretion, and always be frugal.

The discovery that transformed Sumitomo from a regional merchant house into a national power came in 1690. Following the discovery in 1690 of an exposed copper vein at Besshiyama, a village at an altitude exceeding 1,000 meters, Sumitomo confirmed the existence of an excellent deposit and started mining in the following year.

The event that made the fortunes of the house of Sumitomo was the discovery of the huge Besshi Copper mine on the island of Shikoku. The new mine was soon producing more than one-quarter of the nation's output, 1,520 tons of 6,000, at a time when Japan was a leading world producer of copper. The Sumitomo family became the official supplier of copper to the Tokugawa shogunate.

Following the discovery of a major copper deposit in 1690, the Besshi Copper Mine, located in the southeast of Niihama City in Ehime Prefecture, opened in 1691. Copper production continued there for 283 years through the Edo, Meiji, Taisho, and Showa periods until the mine closed in 1973.

But proximity to power carries risk. The Sumitomo family was close to the Tokugawa shogunate throughout the Edo period. During the 1860s, this relationship became a liability for the firm as the Tokugawa clan warred with rivals in western Japan. Following the Tokugawas' defeat, Sumitomo was almost ruined and under pressure to sell the Besshi mine.

The Meiji Restoration was under way and with it the end of the feudalistic Tokugawa shogunate, which had ruled for 264 years. Copper prices were falling, and the price of rice, the staple of the miner's diet, was rising. The miners were issued paper and wooden tokens instead of money. The mine faced bankruptcy; the Sumitomo family, unable to collect on its loans to warlords, was forced to mortgage its household goods.

This moment—the family nearly bankrupt, the shogunate fallen, pressure mounting to sell the ancestral mine—would define whether Sumitomo's first two centuries meant anything.

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Meiji Modernization & Rise of the Zaibatsu (1868-1945)

The family wanted to sell the mine, thus closing the enterprises, but the newly appointed general manager of the Besshi mine, Saihei Hirose, persuaded the family not to do so. Hirose had virtually grown up at the mine, having gone to live there with his uncle, the manager, when he was eight, and had worked there since he was ten, when he started as an office boy. He abolished the mine's seniority system and brought in managers from outside the company.

Saihei Hirose understood what many family businesses miss: survival requires ruthless modernization. Sumitomo kept the mine and improved its output through adoption of new Western techniques. During the rapid westernization of Japan in ensuing decades, Sumitomo started various new trading, manufacturing and financing businesses, becoming one of the major zaibatsu of early 20th century Japan.

In the Meiji Era, in response to the government's policy of promoting the industrial development of Japan, Sumitomo decided to modernize the Besshi Copper Mines. Sumitomo hired a foreign engineer, established a plan, and launched a decisive reform program in 1876. Whereas the mining had previously relied solely on manpower, Sumitomo introduced the use of gunpowder and dynamite to the mining process. A hoist powered by a steam engine enabled efficient discharge of the ore. Whereas porters had previously transported the ore from deep underground to the foot of the mountain along a steep mountain path, a pathway suitable for ox-drawn wagons was constructed. And in 1893, a railway was laid. Within ten years or so, the Besshi Copper Mines achieved rapid modernization.

The production numbers tell the story: By 1880 Japan was mining almost 5,000 tons of copper a year. By the mid-1890s, it was mining four times that amount. Besshi production grew proportionately, from 420 tons in 1868 to more than 2,000 in 1890.

Sumitomo's development as a full-blown zaibatsu occurred over several decades as a natural outgrowth from mining. Thus the family moved from copper mining and refining to copper rolling and steel manufacture, among a number of other industrial enterprises. Like other zaibatsu, Sumitomo at length became a conglomerate with interests in many branches of industry, beyond the original mining and refining business.

What distinguished the Big Four zaibatsu? The "Big Four" zaibatsu of, in chronological order of founding, Sumitomo, Mitsui, Mitsubishi, and Yasuda were the most significant zaibatsu groups. Two of them, Sumitomo and Mitsui, had roots in the Edo period while Mitsubishi and Yasuda traced their origins to the Meiji Restoration.

'Zaibatsu' is a Japanese term referring to industrial and financial vertically integrated business conglomerates whose influence and size allowed control over significant parts of the Japanese economy from the Meiji era to World War II. A zaibatsu's general structure included a family-owned holding company on top, and a bank which financed the other, mostly industrial subsidiaries within them.

The modern corporation we know today traces to a specific corporate event: Sumitomo Corporation was incorporated in December 1919 as The Osaka North Harbour Co., Ltd. The company initially engaged in real estate and harbor development, but would soon transform into something far more consequential.

By 1945, four major zaibatsu (Mitsubishi, Mitsui, Sumitomo, and Yasuda) controlled approximately 25% of Japan's financial capital, 50% of shipbuilding and maritime shipping, and 60% of metal mining. The Mitsui and Mitsubishi trading companies alone handled 70 percent of all Japan's prewar trade.

The war changed everything. The occupation's reforms extended to the economic sphere. One was the breakup of the industrial conglomerates—the zaibatsu. The occupation administration considered Japan's zaibatsu a force the old military government had used in its war effort and made their breakup one of the key steps in transitioning the economy.

By the end of World War II, Sumitomo and its fellow zaibatsu controlled the commanding heights of the Japanese economy. But the atomic bombs that ended the war also marked the end of the old order.

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Post-War Rebirth: From Zaibatsu Breakup to Sōgō Shōsha (1945-1980s)

When the Allied occupation forces arrived in Japan, they brought more than MacArthur's famous pipe. They brought an ideology: the zaibatsu had enabled Japanese militarism, and they must be destroyed. In 1946, after the end of World War II, the Allied occupation authorities ordered the zaibatsu dissolved. Stock owned by the parent companies was put up for sale, and individual companies of the zaibatsu empires were freed from the control of parent companies. The management of the individual companies, however, was not radically changed.

The zaibatsu dissolution was part of a broader series of economic reforms implemented by the Allied Occupation authorities between 1945 and 1952. Major zaibatsu groups like Mitsubishi, Sumitomo, and Yasuda were dismantled, which significantly altered Japan's industrial landscape. The intent behind the dissolution was not only economic reform but also to weaken any potential resurgence of militaristic power in Japan.

Sumitomo took active steps in the direction of the occupation administration's policy by notifying companies under its umbrella that they could no longer use the Sumitomo trade name and trademark while at the same time exploring the dissolution of its central holding company or offering its shares to the public, and renewing the top management.

The trading company that emerged from these ashes was almost unrecognizable. According to company history, the number of staff stood at only 32—all "amateurs" who did not know much about the trading business. But Shunya Toji, who became the first president of Sumitomo Corporation, reportedly encouraged the staff by saying, "Enthusiastic amateurs outperform professionals."

Thirty-two employees. No trading expertise. A banned name. From this wreckage, they would build one of the world's largest trading companies.

After World War II, foreign trade was briefly suspended and the zaibatsu were dismantled. The powerful trading arms of Mitsui and Mitsubishi were each dissolved into over a hundred smaller businesses. When trade resumed in 1950, the first diversified trading companies emerged as Kansai region-based textile traders and steel traders diversified into new industries.

The Cold War intervened before the occupation's economic reforms could be fully implemented. Complete dissolution of the zaibatsu was never achieved, mostly because the U.S. government rescinded the orders in an effort to reindustrialize Japan as a bulwark against communism in Asia.

After the Treaty of Peace with Japan, Sumitomo was able to truly get off to a new start. The use of the Sumitomo name was again permitted and 12 companies in fields spanning Japan's leading industrial sectors—including mining, metals, chemicals, steel, and finance—were born anew. This was not a resurrection of the pre-war zaibatsu: These companies formed a new Sumitomo Group, with each on an equal footing and making decisions independently of the others.

The remnants of the Mitsubishi and Mitsui zaibatsu also coalesced in the 1950s to form new large-scale trading concerns. The term sōgō shōsha came into use around 1955 to refer to this broad set of firms. Sōgō shōsha became a core component of the postwar "keiretsu" business model, in which large commercial banks played a central role in each major keiretsu with a sōgō shōsha playing a secondary central role.

The company's public listing in 1949 on the Tokyo, Osaka and Nagoya stock exchanges marked a decisive transition from family-controlled holding company to publicly traded corporation. As regulations on large companies relaxed in the 1950s, the company resumed closer relations with other Sumitomo Group companies through the "Hakusui-kai" (White Water Club), a coordinating meeting of company presidents. The company began to grow overseas in the 1950s, starting business in Mumbai in 1950 and in New York City in 1952.

By the 1960s Sumitomo officially aimed to be one of the "Big Three" general trading companies, alongside Mitsubishi and Mitsui. The company's transactional volume increased by a factor of ten from 1955 to 1965, and again by a factor of ten from 1965 to 1975.

Sogo shosha are Japanese wholesale companies that trade in a wide range of products and materials. In addition to acting as intermediaries, sōgō shōsha also engage in logistics, plant development and other services, as well as international resource exploration. Unlike trading companies in other countries, which are generally specialized in certain types of products, sōgō shōsha have extremely diversified business lines, in which respect the business model is unique to Japan. The structure of sōgō shōsha can give them advantages in international trade. First, they have extensive risk management capabilities in that they trade in many markets, keep balances in many foreign currencies and can generate captive supply and demand for their own operations. They also have large-scale in-house market information systems which give them economies of scale in pursuing new business opportunities.

In 1988, the company set out its vision of becoming an "Integrated Business Enterprise," aimed at promoting business activities in addition to existing trading activities to expand its earnings base by having two major revenue sources.

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INFLECTION POINT #1: The "Mr. Copper" Scandal (1996)

In the world of commodity trading, nicknames are earned through dominance. Yasuo Hamanaka earned two: "Mr. Copper" for his expertise, and "Mr. Five Percent" because that is how much of the world's yearly copper supply he controlled. Hamanaka, who was known as "Mr. Copper" for his expertise in the market, had been with Sumitomo for over 20 years. He was responsible for trading copper futures and options, and had built up a significant position in the market.

His department had been responsible for more than 90% of Sumitomo's copper trading profits. For years, he was untouchable—a rainmaker whose aggressive strategies generated extraordinary returns.

The Sumitomo copper affair refers to a metal trading scandal in 1996 involving Yasuo Hamanaka, the chief copper trader of the Japanese trading house Sumitomo Corporation. The scandal involves unauthorized trading over a 10-year period by Hamanaka, which led Sumitomo to announce US$1.8 billion in related losses in 1996 when Hamanaka's trading was discovered. The scandal also involved Hamanaka's attempts to corner the entire world's copper market through LME Copper futures contracts on the London Metal Exchange.

The affair was a major scandal which is at times compared in magnitude to the Silver Thursday scandal, involving the Hunt family's attempt to corner the world's silver markets. It currently ranks in the top 10 trading losses in financial history.

The mechanics of Hamanaka's strategy were audacious: He tried to recover earlier losses by taking huge positions in copper commodity futures on the London Metal Exchange. He tried to use the firm's large cash reserves to both corner and squeeze the market and kept the price artificially high for the entire decade leading up to 1995.

Sumitomo owned large amounts of copper that was warehoused and stored in factories as well as numerous futures contracts. Hamanaka controlled 5% of the world's copper supply, which may sound like a very small and insignificant amount, but given the fact that copper is illiquid because it is physical in nature and the logistics of buying and selling it are not as simple as financial commodities, a five percentage holding is quite significant.

Hamanaka's trading strategies were known for their complexity and risk-taking. He often used a technique called "hoarding," where he would buy large amounts of copper and hold onto it, creating an artificial shortage in the market and driving up prices. This strategy was successful for many years and helped Sumitomo become one of the largest copper traders in the world.

Warning signs existed years before the collapse. Threlkeld's company, DLT Inc, traded copper for Hamanaka, and Paul Scully, a DLT employee, warned Threlkeld about problems in Hamanaka's trading practices in 1991. Threlkeld had separately received faxes from Hamanaka requesting to document $500 million of non-existent trades on DLT letterhead. Threlkeld refused, and complained to the LME. The LME discussed the letter with the Securities and Investments Board and Sumitomo management. Ultimately the LME decided it did not have jurisdiction to bring enforcement action against Hamanaka.

Unlike the US, the LME had no mandatory position reporting and no statistics showing open interest. Basically traders knew the price was too high, but they did not have the exact figures of how much Hamanaka controlled and how much money he had in reserve. In the end most cut their losses and had Hamanaka have his way.

The unraveling came swiftly. Sumitomo discovered Hamanaka's unauthorized account and positions at Merrill Lynch and removed Hamanaka from his post on May 9, 1996. Hamanaka confessed to the scheme on June 5, 1996. On June 13, 1996, Sumitomo announced US$1.8 billion of losses related to Hamanaka's trades. Sumitomo then began to unwind Hamanaka's futures and cash copper positions, which caused copper prices to plummet from a high of US$2800 in May 1996 to a two and a half year low of US$1785 on June 25, 1996.

Both traders felt that they could not report these losses to their superiors, but Hamanaka believed he could recover the losses through further trading. Hamanaka would state later at his trial in 1997 that his motivation for the scheme was to cover earlier losses, both before and during his promotion to Sumitomo's head copper trader, and not for personal gain.

The final damage exceeded initial estimates: Sumitomo eventually suffered US$2.6 billion in losses from Hamanaka's positions, and a further US$200 million related to subsequent lawsuits on the affair.

Hamanaka was not charged with market manipulation, but Sumitomo paid fines of US$150 million to CFTC and US$8 million to the SIB to settle charges of copper price manipulations. In 1999, Sumitomo sued Merrill Lynch, UBS, Credit-Lyonnais Rouse, and Morgan Stanley for damages exceeding US$2 billion for aiding and abetting Hamanaka. Merrill Lynch settled with Sumitomo for US$275 million, JP Morgan settled for US$125 million, and UBS settled for $86 million.

The cultural and governance response defined Sumitomo's next chapter. Based on lessons learnt from the unlawful copper trading episode, a strict internal control system was put in place to prevent recurrence. In 1998, the Corporate Mission Statement was established, and the risk-adjusted return ratio was introduced as a new management indicator.

After a Reform Package was adopted in 1999, the company focused on strengthening its financial standing through the prioritization of businesses and improvement of profitability, as well as on reinforcing its business foundation by adding and enhancing the quality of prime assets. In 2003, the Sumitomo Corporation Corporate Governance Principles were established.

Sumitomo Corp. shares posted their biggest fall in almost two decades—a 13 percent drop is the biggest intraday fall since June 1996, the month Sumitomo announced that its chief copper trader, Yasuo Hamanaka, had lost about $2.6 billion in illicit trades of the metal in one of the largest ever commodities trading scandals.

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INFLECTION POINT #2: The Commodity Super-Cycle & Shale Oil Disaster (2010-2015)

History sometimes rhymes with cruel precision. Eighteen years after the copper scandal, Sumitomo would face another existential crisis—this time not from rogue trading but from strategic hubris.

Sumitomo's strategy focused on natural resources through 2014, when the company booked hundreds of billions of yen in losses on tight oil (shale oil) and other energy-related investments.

The setup was understandable. After the Fukushima nuclear accident in March 2011, Japan desperately needed alternative energy sources. Sumitomo was among the most aggressive in ramping up investments in resources in the wake of the Fukushima nuclear accident, which spurred imports of oil, coal and liquefied natural gas into the world's third-largest economy.

The company in August 2012 said it was investing about $2 billion in Texas shale fields via the purchase of a stake in the assets from operator Devon Energy. Sumitomo agreed to pay Oklahoma City-based Devon $340 million cash for 30 percent of the project located in the Permian Basin, the biggest oil resource in North America.

Then oil prices collapsed—and the shale economics proved far worse than expected. Sumitomo, the fourth biggest of Japan's trading companies by market capitalisation, said that an impairment loss of ¥170 billion ($1.6 billion) on a "tight oil" project in west Texas would form the bulk of ¥240 billion of charges for the fiscal year to March 2015. It also flagged a ¥30 billion charge on coal-mining assets in Australia and a ¥50 billion impairment on an iron-ore mining project in Brazil. Combined, Sumitomo said the losses would cut its full-year profit forecast by 96 per cent, from a projected ¥250 billion to ¥10 billion.

That would mark the 95-year-old company's worst result since a ¥23 billion loss in the 1998 fiscal year, when it paid fines to atone for a copper-trading scandal that rocked world markets two years earlier.

The company learned difficult lessons about shale economics: Sumitomo said it had decided to sell roughly three-quarters of its acreage, triggering the loss on the assets and the agreement to fund their development. "It is difficult to extract the oil and gas efficiently," the company said, adding that it could not "expect as much production to recover the investment."

The company's president, Kuniharu Nakamura, attributed these losses to both adverse market factors and Sumitomo's relative inexperience in the field. As a result of these setbacks, Sumitomo was overtaken by Itochu as Japan's third-largest general trading company.

Impairment losses totaling ¥310.3 billion were recognized with regard to a tight oil development project, shale gas project, and tire business in the U.S. as well as an iron ore mining project in Brazil, coal mining projects in Australia, and oil field interests in the North Sea.

The strategic pivot was decisive: Sumitomo announced in 2015 that it would refocus its business on the automotive and infrastructure industries and other non-resource businesses.

The company formed a Special Committee on Managerial Reform tasked with investigating and analyzing the projects in which impairment losses were recognized. This committee discussed various improvement measures from diverse and broad perspectives with an eye toward increasing corporate value, and subsequently made proposals to the Group regarding areas requiring improvement.

In 2013, for further accelerating global consolidated revenue, the company introduced the Broad Regional Management System, decentralizing decision-making while maintaining governance discipline.

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The Modern Transformation: Sustainability, Digital, and the 100th Anniversary (2015-2024)

Having learned brutal lessons from both the copper scandal and shale disaster, Sumitomo embarked on a decade of transformation that would position it for the Buffett era.

In 2017, the "Six Material Issues to Achieve Sustainable Growth with Society" were laid out. In 2019, the company created a new Corporate Message, "Enriching lives and the world" and celebrated its 100th anniversary.

Sumitomo Corporation aims to make the Sumitomo Corporation Group carbon neutral in 2050. The company develops technologies and business models for creating a sustainable energy cycle by reducing CO2 emissions and achieving negative emissions for society as a whole. In addition to reducing and absorbing CO2 emissions from our business, they will contribute to the carbon neutralization of society through cooperative initiatives and recommendations made with business partners and public institutions.

For the power generation business, Sumitomo will not be involved in any new coal-fired power generation business neither IPP (Independent Power Producer) nor EPC (Engineering, Procurement, Construction). For IPP business, they aim to reduce CO2 emissions by 60% or more by 2035 (compared to 2019) and will end all coal-fired power generation business in the late 2040s. They will not make any further investment in the thermal coal mining interest and aim to achieve zero production from thermal coal mines by the end of the 2020s.

Sumitomo Corporation has highlighted mitigation of climate change as one of its key areas of focus and has committed to being carbon neutral by 2050. Sumitomo Corporation recognizes that CCUS is a key technology to combat climate change, and in January 2023 established a dedicated global CCUS team within the Energy Innovation Initiative.

As of April 1, 2024, the "Business Units", "Energy Innovation Initiative" along with its "Divisions" and "Departments" have been removed and Sumitomo operates its organization based on Strategic Business Units (SBUs). SBUs are structured into nine "Groups."

The digital transformation strategy reached its apex with the announced acquisition of SCSK: On October 30, 2025, Trading house Sumitomo announced its plan to make Tokyo-based major information technology service provider SCSK a wholly owned subsidiary through a takeover bid valued at some ¥882 billion ($5.77 billion).

Sumitomo already holds a 50.6 percent equity stake in SCSK. According to the announcement, the purchase price is set at 5,700 yen per share, about 30 percent higher than SCSK's closing price on the announcement day. By fully acquiring SCSK, Sumitomo aims to improve management efficiency and strengthen its artificial intelligence business.

Once completed, SCSK will be delisted from the Tokyo Stock Exchange. This large-scale deal is designed to accelerate Sumitomo's digital transformation and AI-driven growth strategy across all business segments.

The theme of Medium-Term Management Plan 2026 is "No.1 in Each Field." To enhance competitive advantages to achieve growth through addressing social challenges, they will accelerate business portfolio transformation. For that purpose, they will focus on "growth leveraged by strengths" and "strengthen driving force for growth."

By accelerating business portfolio transformation as outlined in the Medium-Term Management Plan 2026 (April 2024 - March 2027), Sumitomo aims to maintain an ROE of 12% or higher and strive to achieve sustainable improvements of corporate value. In FY2024, they exceeded the initial plan and recorded a consolidated net income of ¥561.9 billion, with ROE of 12.4%.

In FY 2024, which was the first year of Medium-term Management Plan 2026, although business environment became more uncertain considering the rise of political turmoil and geopolitical tensions, and sluggish growth in major developed countries, Sumitomo achieved profit growth exceeding the Company's initial plan. Investments totaling a record of ¥730.0 billion have been executed mainly in growth businesses.

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INFLECTION POINT #3: The Buffett Bet (2020-Present)

On August 30, 2020—his 90th birthday—Warren Buffett made an announcement that shocked global investors. Buffett first unveiled the Japanese positions on his 90th birthday in August 2020 after making regular purchases on the Tokyo Stock Exchange, saying he was "confounded" by the opportunity and was attracted to the trading houses' dividend growth.

Berkshire Hathaway acquired over 5% of the stock in Sumitomo Corporation, along with four other Japanese trading houses, over the 12-month period ending in August 2020.

Buffett saw value in ITOCHU, Marubeni, Mitsubishi, Mitsui, and Sumitomo. "We simply looked at their financial records and were amazed at the low prices of their stocks," he recounted in his 2025 letter to Berkshire Hathaway shareholders. The five "very successfully operate in a manner somewhat similar to Berkshire itself."

The investment thesis combined value and income: "The annual dividend income expected from the Japanese investments in 2025 will total about $812 million and the interest cost of our yen-denominated debt will be about $135 million."

Buffett noted: "We like the current math of our yen-balanced strategy. As I write this, the annual dividend income expected from the Japanese investments in 2025 will total about $812 million and the interest cost of our yen-denominated debt will be about $135 million."

The financing structure was characteristically Buffett: By financing his Japanese investments with low-cost yen-denominated debt, Buffett effectively hedges currency risk while capitalizing on the country's lower interest rates, a strategy that has already yielded billions in gains for Berkshire Hathaway.

Berkshire reported $2.3 billion in after-tax gains in its Japanese bonds, of which $850 million were from 2024 alone owing to the strength of the dollar, which appreciated around 11% against the yen in 2024.

Buffett has steadily increased his positions: Berkshire Hathaway raised its holdings in five Japanese trading houses to stakes ranging from 8.5% to 9.8%, according to a regulatory filing. The "Oracle of Omaha" said in his 2024 annual letter that Berkshire is committed to its Japanese investments for the long term and has reached an agreement with the companies to go beyond an initial 10% ceiling.

At the end of 2024, the market value of Berkshire's Japanese holdings came to $23.5 billion, at an aggregate cost of $13.8 billion.

The praise for management has been effusive: "As the years have passed, our admiration for these companies has consistently grown. Greg has met with them many times, and I regularly follow their progress. Both of us like their capital deployment, their managements and their attitude in respect to their investors."

"I expect that Greg [Abel] and his eventual successors will be holding this Japanese position for many decades and that Berkshire will find other ways to work productively with the five companies in the future," said Buffett.

"In the next 50 years ... we won't give a thought to selling those," Buffett said in May 2025. "We will not be selling any stock. That will not happen in decades, if then."

Each of the five trading companies appears to have a very similar micro-moat, a moat protecting one entity. However, more decisive is that they together benefit from a macro-moat: the moat around trading for Japan. Consider that the share of trade as part of Japan's GDP was 37.3% in 2021. These trading companies are supplying the Japanese economy with the resources that the Japanese economy needs; about $732 billion in exports and $700 billion in imports. Scarce in natural resources, rich in sophisticated companies and an advanced economy, its resource demands are considerable—and will stay so, long into the future. While these trading companies are individually not bestowed with strong competitive strategies, collectively these companies profitably and reliably dominate Japan's trade.

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The Sōgō Shōsha Business Model Deep Dive

Understanding Sumitomo requires understanding sōgō shōsha—a business model that exists nowhere else on Earth.

The five trading firms that Berkshire has invested in are the biggest of Japan's so-called sogo-shosha, or general trading companies. These firms have played a unique role in Japan's economic history, from providing energy to minerals and food for a mostly mountainous archipelago with few natural resources. Today, Japan's trading companies derive most revenue from non-trade activities, and have built up interests in everything from logistics to real estate, frozen foods, aerospace, and newer investments such as EVs and renewable energy.

The company has 886 subsidiaries. The operating segments include metal products, media and digital, transportation and construction systems, living-related and real estate, infrastructure, and mineral resources, energy, chemical, and electronics.

As one of the multinational corporations driving worldwide development, Sumitomo Corp. has been listed on the Fortune Worldwide 500 for 28 years. The company operates with over 83,000 employees in 129 locations in 66 countries and regions.

In the fiscal year ended March 31, 2024, Sumitomo Corporation generated 6.91 trillion Japanese yen in revenue, recovering from the downward trend of the previous years. In the fiscal year ending March 31, 2025, Sumitomo had annual revenue of 7.29T with 5.52% growth.

The business model defies Western categorization: They are extremely diversified (often said that they handle everything "from noodles to satellites") and because of this, investors easily get lost in the diversity of their business operations and fail to grasp the big picture. There is also no "Western comp", further making them challenging to understand. Interestingly, the rating agency Moody's recognizes Sogo Shoshas as its own unique category, separate from other conglomerates and distribution businesses.

Japan's economic drivers sogo shosha—General trading companies in Japan—are complex and powerful conglomerates exercising a vast range of international business activities. They have greatly contributed to economic growth in Japan and the globalization of business, not least because of their exceptional ability to successfully adapt to changing economic conditions domestically and globally. Sogo shosha typically handle a vast number of products from energy to metals to food and textiles and provide a huge range of services to manufacturers. They often function as financial intermediaries between banks and clients.

Sōgō shōsha are among the highest-paying employers in Japan. Along with financial institutions, these companies have consistently been ranked among the most popular employers for the graduates of top Japanese universities for over thirty years due to their high compensation levels, employment stability and the diversity of opportunities available to prospective employees.

Shoshas still to this day attract the best talent in the country, from all the target schools. In one brand survey conducted for the class of 2024, Itochu ranked #1, and two other Shoshas made it to the top 10 list (Mitsubishi Corp and Marubeni). They were ranked even higher than Sony, Toyota, and all other Japanese blue-chips. Usually, no matter what survey you look at, Itochu comes up in the top 3, and other Shoshas come in highly too.

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Playbook: Business & Investing Lessons

The 400-Year Time Horizon

Sumitomo's Founder's Precepts from the 1600s still guide modern decisions. Throughout our history spanning over 400 years, we have inherited and upheld Sumitomo's Business Philosophy. One of its core tenets, "Business is People" represents our unwavering belief that our people are the source of our competitiveness and the driving force behind our growth.

Crisis as Catalyst

Both the 1996 copper scandal and 2014 shale losses led to fundamental strengthening—new governance systems, risk-adjusted return metrics, and strategic refocusing. The company emerged from each crisis with better controls, clearer strategy, and stronger balance sheets.

The "Enthusiastic Amateurs" Philosophy

Starting fresh after WWII with 32 untrained employees, Sumitomo proved that culture and determination can overcome expertise deficits. The Founder's Precepts emphasizing integrity and sound management provided the foundation even when trading expertise was absent.

Conglomerate Logic

All five are the biggest "sogo shosha," or trading houses, in Japan that invest across diverse sectors domestically and abroad—"in a manner somewhat similar to Berkshire itself," Buffett said.

Capital Allocation Discipline

The post-1998 risk-adjusted return ratios institutionalized lessons from the copper scandal. During the term of Medium-Term Management Plan 2026, by maintaining ROE of 12% or higher while expanding growth businesses with competitive advantages, they aim to achieve profit for the year of 530 billion yen for fiscal 2024 and of 650 billion yen for fiscal 2026.

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Strategic Analysis: Porter's 5 Forces & Hamilton's 7 Powers

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Porter's 5 Forces Analysis

1. Threat of New Entrants: LOW

Its closure from the outside world for over 200 years meant that trade had to be developed in a very short period of time relative to Europe, where networks could naturally develop over a longer period of time. Japan also lacked effective capital markets to fund companies, and its industrial base was largely composed of cottage industry enterprises that could not market on their own.

Building a sōgō shōsha from scratch would require decades of relationship building, massive capital, and global infrastructure. Sumitomo's 400-year history creates barriers that cannot be replicated.

2. Bargaining Power of Suppliers: MODERATE

Diversification across industries reduces dependence on any single supplier. Long-term partnerships with Sumitomo Group companies and global sourcing capabilities reduce concentration risk. The company's 886 subsidiaries create multiple sourcing options.

3. Bargaining Power of Buyers: MODERATE

The five trading firms that Berkshire has invested in are the biggest of Japan's so-called sogo-shosha. Their traditional role has been to import energy, minerals and food into Japan, a mostly mountainous archipelago with few natural resources, and to export finished products.

Japan's structural dependence on imported resources gives the sōgō shōsha persistent relevance.

4. Rivalry Among Existing Competitors: HIGH

Mitsui & Co.'s most significant direct rivals include Mitsubishi Corporation, Itochu Corporation, Sumitomo Corporation, Marubeni, and Sojitz. These organizations are characterized by their long histories and broad operational scope, making them formidable competitors in the global marketplace.

However, competition is surprisingly collegial—the "Big Five" often collaborate on major projects and compete across different market segments rather than head-to-head across all lines.

5. Threat of Substitutes: MODERATE-LOW

Unlike trading companies in other countries, which are generally specialized in certain types of products, sōgō shōsha have extremely diversified business lines, in which respect the business model is unique to Japan. The structure of sōgō shōsha can give them advantages in international trade.

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Hamilton's 7 Powers Framework

1. Scale Economies: Sumitomo's global presence across 66 countries and 886 subsidiaries creates cost advantages in information gathering, logistics, and financing that smaller competitors cannot match.

2. Network Effects: The keiretsu structure and cross-shareholdings within the Sumitomo Group create reinforcing relationships—each company's success benefits the others.

3. Counter-Positioning: The sōgō shōsha model is so uniquely Japanese that Western competitors cannot easily replicate it without undermining their own business models.

4. Switching Costs: Long-term supplier and customer relationships, built over decades, create significant switching costs for counterparties.

5. Branding: The Sumitomo name—400 years of history—represents reliability in Japanese business culture that cannot be purchased or quickly created.

6. Cornered Resource: Access to Japan's elite university graduates and decades of accumulated institutional knowledge represent human capital advantages.

7. Process Power: The accumulated know-how of operating across industries, geographies, and business cycles represents embedded operational capability.

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Key Performance Indicators to Monitor

For investors tracking Sumitomo Corporation, three metrics matter most:

1. ROE Relative to Hurdle Rate

Sumitomo aims to maintain an ROE of 12% or higher. In FY2024, they recorded ROE of 12.4%. This metric indicates whether the company is generating returns above its cost of capital. A sustained ROE above 12% signals effective capital allocation and portfolio management.

2. Non-Resource vs. Resource Profit Mix

The shift away from commodity dependence toward value-added services represents Sumitomo's strategic transformation. Non-mineral resources showed +¥46.0 billion improvement while mineral resources declined ¥11.0 billion. Tracking this ratio reveals whether the diversification strategy is succeeding.

3. Dividend Growth and Total Shareholder Returns

The interim dividend for the fiscal year was 65 yen per share. Considering the forecast for FY2025 is 570.0 billion yen, they plan to increase the annual dividend for FY2025 by 10 yen per share compared to the previous fiscal year. Buffett specifically cited dividend growth as his attraction to these investments. Consistent dividend increases signal management confidence and capital discipline.

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Bull and Bear Cases

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Bull Case

1. Buffett Endorsement: Buffett himself has made clear he and his successor Greg Abel are in it for the long haul. "In the next 50 years ... we won't give a thought to selling those."

2. Valuation Discount: Japanese equities still trade at a 32% discount to U.S. markets, signaling significant upside as foreign capital flows and earnings quality improve.

3. Digital Transformation: The SCSK acquisition positions Sumitomo for AI and digital integration across its 886 subsidiaries.

4. Energy Transition Positioning: Sumitomo established a dedicated global CCUS team within the Energy Innovation Initiative. This new team will capitalize on existing resources to establish new business along the whole CCUS value chain.

5. Governance Improvements: Post-scandal governance reforms and shareholder-friendly capital return policies align management with investors.

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Bear Case

1. Commodity Exposure Remains: Despite diversification, mineral resources still contribute significant earnings and create volatility.

2. Yen Weakness Impact: A strengthening yen could reduce translated earnings and pressure the stock.

3. Execution Risk: The digital transformation and SCSK integration require flawless execution across a complex organization.

4. Competition Intensity: As a result of the shale setbacks, Sumitomo was overtaken by Itochu as Japan's third-largest general trading company. Regaining ground requires sustained outperformance.

5. Geopolitical Risk: Global trade tensions and potential China-related disruptions could impact trading volumes and margins.

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The 400-Year Lesson

In 1652, a former Buddhist monk died in a retreat near Kyoto, having left behind precepts about integrity, prudence, and patience in business. Four centuries later, those precepts still hang in the headquarters of a company that has survived shogunate collapse, imperial expansion, world war, occupation, rogue traders, and commodity busts.

This culture of valuing our people has long been perpetuated as an integral part of our Group's DNA, and we have always positioned talent discovery and development as top management priorities. The Group, which is engaged in a wide variety of businesses on a global scale, aims to maximize the use of its own management capital to create new value by addressing social challenges, thereby enhancing corporate value sustainably over the medium to long term.

Warren Buffett, speaking of his Japanese investments, offered perhaps the best summary of why Sumitomo matters: "The Japan investment has just been right up our alley." For investors, Buffett's Japan bet has become a reminder that even in his 90s, the legendary stock picker can still surprise the market.

The question for long-term investors is not whether Sumitomo will exist in 50 years—its 400-year track record suggests it will. The question is whether its combination of diversification, governance, and strategic positioning can generate attractive returns as Japan's economy evolves and the energy transition reshapes global trade.

From copper smelting in the Tokugawa era to carbon capture in the 21st century, Sumitomo's story is one of continuous reinvention within enduring values. For investors with the patience to match the company's time horizon, that combination may prove as valuable as the Besshi copper vein that built an empire.