NIKKEI: Japan’s Premier Stock Index

The NIKKEI, formally known as Nikkei 225, is Japan’s premier stock market index, much like the Dow Jones Industrial Average (DJIA) in the United States.  Nikkei 225 comprises 225 of the most frequently traded stocks listed on the Tokyo Stock Exchange (TSE). 

Nikkei all time high

Just like the DJIA, Nikkei 225 is a price-weighted index, where each constituent makes up a fraction of the index that is proportional to its component. A stock trading at $50 will thus be making up 10 times more of the total index compared to a stock trading at $5.  

Nikkei 225 not only offers a snapshot of the Japanese market but also serves as a crucial signal for global economic trends. Its role extends beyond Japan, impacting global finance and guiding investors worldwide. Understanding the Nikkei 225 therefore equips one with a broader understanding of the world’s economic health and the dynamism of the Asian markets.

Nikkei and the Japanese economy 

Established in 1950, the Nikkei functions as a vital benchmark for the Japanese stock market’s performance, encompassing a wide array of sectors. Importantly, the component companies are revised annually, specifically in September, ensuring its relevance and connection to the dynamic nature of the Japanese economy. It should also be noted that companies listed on the Nikkei enjoy a significant prestige boost, which in turn can help promote high share prices. 

The Nikkei is often used as an overarching benchmark for Japan’s economy, and any fluctuation within the index tend to be interpreted by the market as an accurate reflection of the country’s overall economic health. Due to the inclusion of various sectors within the index—from electronics and automobiles to banking and retail—Nikkei 225 provides investors and economists with a comprehensive view of Japan’s business environment.

Consequently, a rise in the Nikkei often results in increased consumer and investor confidence, leading to more robust economic activities. On the flip side, a drop could signal economic difficulties or slower growth, affecting market sentiment and easily turning into a self-fulling negative prophecy. 

The Role of Nikkei 225 in global investment 

The Nikkei plays a critical role in global finance. It’s not just a Japanese economic barometer but a gauge for Asian markets as a whole. International investors closely watch the Nikkei as an essential guide to business trends in the region.

Due to Japan’s advanced and diverse market, the Nikkei is often included in globally diversified portfolios. Exchange-Traded Funds (ETFs) have made speculation on indices like Nikkei more accessible, allowing individuals and institutional investors to gain exposure to Japan’s market without purchasing each stock individually.

NIKKEI 225 Futures 

Nikkei 225 Futures were first introduced at the Singapore Exchange (SGX) in 1986. Two years later, Nikkei 225 Futures became available at the Osaka Securities Exchange (OSE) in Japan, and the Chicago Mercantile Exchange (CME) followed in suit in 1990. 

NIKKEI history

Nikkie 225 has seen some monumental surges and slumps, each telling a riveting tale about the global economy. One such event was the infamous Japanese asset price bubble of the late 1980s, when the Nikkei 225 hit a new record high of 38,957.44 points on December 29, 1989. The subsequent burst of the bubble led to a crippling two-decade-long economic decline known as Japan’s “Lost Decade”. 

With that said, the Nikkei 225 has shown remarkable resilience over the years. An example of this was its recovery after the devastating 2008 global financial crisis. The Nikkei dropped to a 26-year low, but soon managed to rebound and exhibit steady growth – primarily due to robust corporate earnings. The 

A few examples of milestones for the Nikkei 225

  • On 28 October, 2008, the index reached an intraday low of  6,994.90. 
  • On the second working day after the Tōhoku earthquake and tsunami in March 2011, the index dropped over 10%. The index then continued to fall for much of the remaining year, bottoming out at 8,160.01 on 25 November, 2011. It finnished the year somewhat better, at 8,455.35. 
  • The year 2013 was a year of great volatility for the Nikkei 225. It started the year near 10,600 and had rosen sharply to 15,942 before May was over. Then, it dropped by nearly 10%.
  • Nikkei 225 finally climed over the 20,000 mark by 2015. Market optimism was mixed, however, as many analysts feared that the rise since 2013 was artificial and brought on by purchases made by the Bank of Japan. By the end of 2017, Japan’s national bank owned roughly 75% of all the Japanese Exchange-Traded Funds (ETFs) and was a top-10 shareholder in 90% of the Nikkei 225 constituent companies. 
  • Amidst the Covid19 pandemic, the Nikkei 225 breached the pyschologically important 30,000 benchmark on 15 february, 2021. This was largely due to the massive monetary stimulus and asset purchase programs carried out by the Bank of Japan to mitigate the economical and financial effects of the pandemic. 
  • The old 38,957.44 record from 1989 held for 34 years, but in early 2024 it was broken by a new all-time-high. On 22 February, 2024, the Nikkei 225 reached an intraday high of 39,156.97 and closed at 39,098.68. 
  • On 4 March, 2024, the Nikkei 225 breached 40,000 for intraday trading and was also above 40,000 at closing. 
  1. Questions and answers about Nikkei 225

When did this index begin? 

The Nikkei 225 began to be calculated on 7 September, 1950, but was retroactively calculated back to 16 May, 1949. Back then, the average price of the component stocks was 176.21 yen. 

How often is the Nikkei 225 updated? 

Since July 2017, the index is updated every 5 seconds during trading sessions.