NIKKEI

The Nikkei 225, commonly referred to as the Nikkei Index, is Japan’s most widely followed stock market index and one of the leading benchmarks in Asia. It tracks the performance of 225 major companies listed on the Tokyo Stock Exchange (TSE) and serves as a key indicator of Japan’s economic health.

As Japan is the world’s third-largest economy and a major exporter of automobiles, electronics, and industrial equipment, the Nikkei 225 plays an important role in global financial markets.

What is the Nikkei 225?

The Nikkei 225 is a stock market index that measures the performance of 225 large, publicly traded Japanese companies. It is published by Nikkei Inc., a leading Japanese financial media company.

The index is:

• One of the oldest Asian stock indices
• A key benchmark for the Japanese equity market
• Widely tracked by global investors and institutions

The Nikkei 225 is often compared with the Dow Jones Industrial Average because both use a similar calculation method.

History of the Nikkei 225

The Nikkei 225 was first calculated in 1950, with its base date retroactively set to 1949. It became widely recognised during Japan’s economic boom in the 1980s.

During the late 1980s:

• Japan experienced a massive asset bubble

• The Nikkei reached an all-time high near 39,000 points in 1989

• After the bubble burst, the index went through a prolonged period of stagnation

Over time, Japan’s economic reforms and globalisation have shaped the Nikkei’s performance.

How Does the Nikkei 225 Work?

The Nikkei 225 is a price-weighted index, meaning:

• Companies with higher stock prices have a greater influence on the index

• Market capitalisation is not the primary weighting factor

• A divisor is used to adjust for stock splits and structural changes

Because it is price-weighted, movements in high-priced stocks can significantly affect the index level.