The Nikkei

The Nikkei is a stock market index for the Tokyo Stock Exchange (TSE). It has been calculated daily by the Nihon Keizai Shimbun (The Nikkei) newspaper since 1950. It is a price-weighted index, operating in the Japanese Yen (JP¥), and its components are reviewed once a year. Currently, the Nikkei is the most widely quoted average of Japanese equities, similar to the Dow Jones Industrial Average. In fact, it was known as the "Nikkei Dow Jones Stock Average" from 1975 to 1985.

Components

The Nikkei 225 has more than 200 components. The top components of the Nikkei include Fast Retailing, Softbank, and Fanuc. The shares included in it are those of the top 225 companies listed on the Tokyo Stock Exchange.

Calculation

The Nikkei is a price-weighted index, meaning that the companies with higher share prices have greater weight. It's calculated by adding the prices of the stocks of the 225 companies and dividing by a divisor. The divisor is adjusted to maintain continuity in the index's value when stocks are replaced or when stock splits occur.

History

The Nikkei started near 100 points in 1950 and hit its all-time high on December 29, 1989 during the peak of the Japanese asset price bubble, when it reached an intra-day high of 38,957.44 before closing at 38,915.87. After 1989, it experienced a major downturn, losing nearly all these gains by 2003. From 2003 to 2007, the index recovered a little over half of its lost ground. However, it slumped again from late 2007 and 2008 in response to the Global Financial Crisis.

Influence

The Nikkei is the most widely watched index of Asian stocks. It is considered a gauge of the health of the Japanese economy, and changes in the index can influence investor sentiment globally.

See also

• List of stock market indices
• Economy of Japan
• Tokyo Stock Exchange