Nikkei 225

Nikkei 225(1970-)

Nikkei 225 is a stock market index for the Tokyo Stock Exchange (TSE). It is one of the most prominent stock indices in Japan, measuring the performance of 225 top-rated companies listed on the Exchange. The index is a price-weighted index, meaning that companies with higher stock prices have more influence on the index's performance. This method is similar to the Dow Jones Industrial Average used in the United States. The Nikkei 225 was first published on September 7, 1950, and it is calculated and published by Nihon Keizai Shimbun (Nikkei), Japan's largest financial newspaper.

Overview

The Nikkei 225 serves as a key indicator of the health of the Japanese economy and stock market, providing investors and analysts with a snapshot of the market's performance. It includes companies from various sectors, including technology, consumer electronics, automobiles, chemicals, and banking, reflecting the diversity and strength of the Japanese economy. Notable companies in the index include Sony, Toyota, and SoftBank.

Calculation

The index is calculated using a price-weighted average, which means that stocks with higher prices per share have a greater impact on the index's overall movement. This is different from a market capitalization-weighted index, where companies with larger market caps have more influence. The price-weighting method can lead to distortions, as a high stock price does not necessarily correlate with a company's overall value or market capitalization.

History

Since its inception in 1950, the Nikkei 225 has experienced significant fluctuations, reflecting the changing fortunes of the Japanese economy. The index reached its all-time high on December 29, 1989, during the peak of the Japanese asset price bubble. Following this peak, the index suffered a prolonged decline, reflecting the burst of the bubble and the ensuing economic challenges faced by Japan, including deflation and slow growth.

Significance

The Nikkei 225 is widely followed by investors around the world as a leading indicator of the performance of the Japanese stock market and economy. It is used by investors to gain exposure to the Japanese market and by financial professionals to benchmark the performance of Japanese equities. The index is also the underlying asset for various financial products, including exchange-traded funds (ETFs), futures contracts, and options.

See Also

• Stock market
• Tokyo Stock Exchange
• Dow Jones Industrial Average
• Economy of Japan