The Nikkei 225 Stock Average represents blue-chip companies on the Tokyo Stock Exchange. It’s the way of choice to track the health of the Japanese stock market and economy. It can be roughly equated to the Dow Jones. It’s the oldest Asian index, existing since May 1949. It represents the most liquid domestic stocks on the Tokyo Stock Exchange, and differ from other similar indices, however, in that it doesn’t use market capitalization but rather stock price. It’s calculated every 15 seconds while the stock exchange is open.
Nikkei 225 Overview
The Nikkei 225, also known as Japan 225, is a highly popular index among traders as it serves as an indicator for the overall performance of the Tokyo Stock Exchange.
The index consists of 225 stocks from the most valuable domestic companies in Japan across a variety of industries including banking, retail, automotive and technology.
Constituents of the index include popular brands such as Sony Corp., Toyota Motor Corp., Mazda Motor Corp. and Canon Inc.
Factors affecting the price of Nikkei 225
Since the Nikkei 225 is a price-weighted index, the higher the price of the stock, the higher the weight it enjoys in the index. As such, the performance of a company with a high-priced stock will have a more pronounced effect on the index as whole compared to a company with a lower stock price.
Being considered as one of the most volatile indices, the Nikkei 225 is particularly vulnerable to local as well as global developments, social and political turmoil.
The U.S is a major importer of Japanese products and therefore, any development that may affect the U.S economy and the U.S dollar will potentially have a similar effect on the overall value of the index.
Did you know…?
The Nikkei 225 provides traders with access to increased market volatility as it fluctuates substantially throughout the daily trading session. Therefore, it is a highly desirable index to include in an aggressive trading portfolio. The intraday volatility and deep liquidity of the index translate to increased profit potential especially when compared to other indices of the same calibre.