Nikkei 225: The History and Evolution of Japan’s Leading Stock Market Index

Japan’s most popular stock market index is Nikkei 225. It comprises 225 of Japan’s largest and most liquid companies, which serves as an indicator for Japan’s economic health.

History of Nikkei, 225

The Nikkei newspaper created the Nikkei Index 225 in 1950. It was then known as The Nikkei Dow Jones stock average and contained only 225 stocks. It has become the benchmark of Japanese equity markets since that time.

Composition of Nikkei (225)

The Nikkei225 Index includes 225 of Tokyo Stock Exchange’s most liquid and large companies. Companies are selected based on several factors such as market capitalization or liquidity. Fast Retailing, SoftBank Group and Sony Corporation were the top three ranked members of this index by their weight as of January 2023.

Calculation of Nikkei225 Index

The Nikkei225 differs from other stock-market indices in that the index is not weighted based on market capitalization. Instead, the index has a price-weighted structure, meaning that companies with higher stock market prices have more influence on the index’s performance. However, this could cause distortions in the index since companies with lower stock prices are given less weighting.

Performance of Nikkei 2225

The Nikkei225 Index has a long record of volatility. There have been several significant crashes over its history. It hit an all-time high in 1989 at 38,916, but it plummeted to 7,055 by 2009. The index has traded at or near the 30,000 level for the past few years.

Investing in Nikkei 225

Investors can be exposed to the Nikkei 2225 via several methods, including ETFs and mutual funds. These funds allow investors to have a diverse portfolio of stocks which closely mirrors index performance.

Conclusion

The Nikkei225 stock market index in Japan is the most closely watched by investors from around the world. Despite volatility in the past it is an important indicator of Japan’s economic health.