What Is the Nikkei 225 Index and How Can You Trade It? IG International

The performance of the Nikkei also influences other Asian stock markets due to Japan’s economic significance in the region. The Nikkei is short for Japan’s Nikkei 225 Stock Average, the leading and most-respected index of Japanese stocks. It is a price-weighted index composed of Japan’s top 225 blue-chip companies traded on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average (DJIA) Index in the United States.

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• TOPIX is affected by stocks with large market valuations, such as financials.
• Because each company’s stock is weighted by its price per share, the Nikkei tends to be influenced by high-priced stocks such as technology stocks.
• In fact, to give you an idea as to just how artificial the bubble was, in the 15 years prior to 1990, the Nikkei stock index increased by more than 900%.
• The stocks that make the list are reviewed in April and October each year.

Nikkei 500 consists of 500 companies from various sectors, making it a more diverse and broader representation of the Japanese stock market. As Japan’s premier stock index, the Nikkei plays a critical role in global financial markets. It is seen as Cyber security stocks a barometer for Japan’s economic health, providing investors around the world with an understanding of the country’s economic condition and business cycle.

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A weaker Yen generally boosts the Nikkei because it makes Japanese exports more competitive, thereby improving the earnings prospects of Japanese multinational companies. limefx For example, the introduction of “Abenomics” in 2012, a set of economic policies implemented by former Prime Minister Shinzo Abe, helped to drive a multi-year bull market in the Nikkei. The healthcare sector is another crucial component of the Nikkei index, with leading pharmaceutical companies like Takeda Pharmaceutical and Daiichi Sankyo featuring in the index.

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Constituent stocks are ranked by share price, rather than by market capitalization as is common in most indexes. The composition of the Nikkei is reviewed every September, and any needed changes take place in October. To compile the list of stocks, a review is conducted once a year in September, with changes to the ranking and composition implemented in October. The tech industry is the largest sector weighted on the Nikkei index, followed by other industries involved in consumer products, transportation and utilities.

Due to the size of the Japanese economy and its position on the continent, the Nikkei 225 index can be a useful indicator of market sentiments in the region of East Asia. The Nikkei 225 index offers traders and investors an avenue to get exposure to the entire Japanese economy in a single position. The price of the Nikkei 225 is affected by share prices of the companies in the index. A wobble in any given sector, like tech, will impact the price of the Nikkei.

In addition to government bonds, the TSE also acted as an exchange for gold and silver currencies. The index has been calculated since September 1950, retroactive to May 1949. Among the best-known companies included in the Nikkei index are Canon Incorporated, Sony Corporation, and Toyota Motor Corporation. Another way of getting exposure is trading individual Nikkei stocks, such as car manufacturers Toyota and Nissan or electronics producers Sony and a review of “financial modeling” Panasonic. You can trade ETFs with CFDs, but this offers lower liquidity and larger spreads than trading the Japan 225 directly. These funds won’t mirror the Nikkei price directly, and instead will be linked to the ETF’s net asset value.

Price-Weighted Index: The Basics

However, this only includes blue-chip companies, and thus, excludes the likes of ETFs and other non-equity based securities. In its most basic form, the Nikkei 225, or simply the ‘Nikkei’, is a mechanism that tracks the performance of the Tokyo Stock Exchange. It is important to recognize that because there are now more than 3,500 individual companies listed on the main Tokyo Stock Exchange, the Nikkei instead tracks a limited number of equities. Although international traders cannot invest directly in the index, you can gain exposure to the underlying stocks within the Nikkei 225 via an exchange-traded fund (ETF). The Nikkei 225 Stock Average is Japan’s primary stock index and a barometer of the Japanese economy. It gauges the behavior of top Japanese companies, covering a broad swath of industries.

In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it.

IG International Limited receives services from other members of the IG Group including IG Markets Limited. The only way to trade on the Nikkei 225 price directly with us is through our Japan 225 index. You’ll use CFDs to take a position, and your profit or loss will depend on the outcome of your prediction. Most European traders seek to diversify their portfolio, and the Nikkei 225 tends to be the preferred outlet because the Japanese economy is one of the biggest across the globe.