One option is the MAXIS Nikkei 225 Index ETF, which offers exposure to the Japanese stock market with a U.S.-listed, dollar-denominated exchange-traded fund. Much like in the case of other major stock exchanges, the Tokyo Stock Exchange bridges the gap between corporations and investors. Through the use of real-time electronic tracking, the exchange details the current trading prices available on each of the companies it lists.

What is the Nikkei?

An ETF that tracks it and is denominated in U.S. dollars is the MAXIS Nikkei 225 ETF. Most ETFs tracking the Nikkei are denominated in Japanese yen, including the Daiwa Asset Management ETF and the iShares Core Nikkei 225 ETF. However, you can gain exposure one financial markets review is scam or legit broker to this index by buying shares of an ETF that tracks the Nikkei. Take self-paced courses to master the fundamentals of finance and connect with like-minded individuals. Our goal is to deliver the most understandable and comprehensive explanations of financial topics using simple writing complemented by helpful graphics and animation videos.

Impact of Japanese Economic Policies on Nikkei

In addition to monitoring the performance of the Nikkei 225, you must consider exchange rate fluctuations between the yen and the dollar. Sectors represented in the index include technology, financials, consumer goods, materials, capital goods, transportation, and utilities. The Nikkei 225 Stock Average is Japan’s primary stock index and a barometer of the Japanese economy.

Different Ways to Invest in Nikkei

Furthermore, some index funds or ETFs will even attempt to beat the official index, by making some weighting adjustments. You should also recognize that the official Nikkei 225 tracking index cannot be invested into per-say. This is because the index itself is there for tracking purposes only, rather than acting as a direct financial instrument. In other words, those involved in the Nikkei 225 investment space back in the mid-to-late 1980s would have no doubt been hit hard by the crash. On the other hand, the index has been performing reasonably well since late 2012, where it was priced in the region of 8,00 points.

It is important to recognize that because there are now more than 3,500 individual companies listed on the main Tokyo Stock Exchange, the Nikkei instead tracks a limited number of equities. Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications. Understanding these indices helps global investors make informed decisions, illustrating the intricate interplay of economic factors and corporate performance. It comprises 225 of the largest, most liquid companies listed on the Tokyo Stock Exchange across a diverse range of sectors. Moreover, given the global reach of many Japanese companies, the Nikkei also offers indirect exposure to global economic trends.

Before the economic downturn came to fruition,  in 1989 the Nikkei peaked at 38,916 points. The scary thing is that almost 30 years later, the Nikkei 225 has still not got anywhere close to the all-time highs it experienced in 1989. As such, it wouldn’t make sense to include smaller organizations on the main index, not least because their effect on the health of the Best high yield dividend stocks wider economy is less notable. As we will discuss below, the most-established of these indexes is the Nikkei 225.

The ranking of companies is determined by stock price, which differs from other major indexes where market capitalization is used in calculations. The Nikkei is a price-weighted index, meaning it’s calculated based on the stock prices of its component companies. The total value of the index is the sum of the stock prices of all 225 companies, adjusted by a divisor for stock splits and other corporate actions.

1. The global financial crisis of 2008 caused a sharp fall in the Nikkei, reflecting the severe economic downturn that followed.
2. In contrast, market-capitalization-weighted indices are less sensitive to stock price changes, as the weights are determined by market capitalization, which is less prone to short-term fluctuations.
3. Some examples of ETFs that trade on the Tokyo Stock Exchange include Blackrock Japan’s iShares Nikkei 225 and the Nomura Asset Management’s Nikkei 225 Exchange Traded Fund.
4. More recently, since 2012, the Nikkei has largely moved in tandem with other global indices, reflecting the increasingly interconnected nature of global financial markets.
5. However, there are several exchange-traded funds (ETFs) who are composed of companies that correlate to the Nikkei.

Constituent Stocks

In this article, we’ll take an in-depth look at the Nikkei index and provide investors with suggestions for how they can invest in the index. The shares included in it are weighted according to price; the index level represents the average of the shares included in it. Dividend payments and stock market turnover are not considered when calculating the index.

However, risks include exposure to the Japanese economy’s unique challenges, including its aging population and high public debt levels. Additionally, because of the price-weighted nature of the Nikkei, it can be more volatile than other indices. More recently, since 2012, the Nikkei has largely moved in tandem with other global indices, reflecting the increasingly interconnected nature of global financial markets. Other notable crashes include the dot-com bust in 2000 and the global financial crisis in 2008, both of which were followed by robust recoveries.

It gauges the behavior of top Japanese companies, covering a broad swath of industries. Broadly considered Japan’s equivalent to the Dow Jones forex capital markets announces 56 layoffs at plano office following deal with regulators Industrial Average, it includes the top 225 blue-chip companies listed on the Tokyo Stock Exchange. The Nikkei is influenced by a variety of factors, including Japanese economic policies, global economic events, fluctuations in the Japanese Yen, and the performance of its constituent companies.

We may earn a commission when you click on a link or make a purchase through the links on our site. All of our content is based on objective analysis, and the opinions are our own. On the reward side, the Nikkei offers exposure to some of the world’s largest and most innovative companies and has shown strong growth potential in recent years. The most significant crash in the history of the Nikkei occurred in the early 1990s when the Japanese asset price bubble burst. In December 1989, the index reached an all-time high of nearly 39,000 points, fueled by an asset price bubble. Market capitalization is another essential criterion for inclusion in the Nikkei index.

Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. For example, the introduction of «Abenomics» in 2012, a set of economic policies implemented by former Prime Minister Shinzo Abe, helped to drive a multi-year bull market in the Nikkei. Japanese consumer goods companies, such as Uniqlo’s parent company Fast Retailing and Kao Corporation, are also part of the Nikkei index.

However, this doesn’t necessarily make the Nikkei 225 index an unworthy investment. While the above figures do make nervous reading, it is important to remember that investing is all about timing. If you thought the bubbles of the Dot.com boom of the late 1990s or the housing market crash of 2008 were bad, nothing gets close to what Japan experienced. In fact, to give you an idea as to just how artificial the bubble was, in the 15 years prior to 1990, the Nikkei stock index increased by more than 900%.