The Nikkei is the primary tracking index in Japan. In many ways, it is the Tokyo equivalent of the Dow Jones Industrial Average. The Nikkei is a selection of assembled companies meant to track the performance of the Tokyo Stock Exchange. The Japanese stock market is currently the fourth largest stock market in the world, and the largest in Asia. That’s right, the Tokyo exchange is actually more valuable than the exchanges found in China. However, as China’s economy grows, that might change.
The Nikkei 225 is the primary tracking index, and as you’ve probably guessed, it’s comprised of 225 different assets. Financial authorities review these assets once a year, and they can make adjustments when they need to. For example, if a company loses value, and under performs, the authorities could replace it. The primary philosophy behind the index is to basically offer a way for people to quickly and easily track the health of Japanese markets.
This is, more or less, the same philosophy behind the DJIA, S&P 500, and NASDAQ in the United States. In other countries, there is the German DAX, or the French CAC 40, or the FTSE in London. There are many indices for markets around the world. Investors pay very close attention to these indices. If Indices trend up, that generally means that investors are feeling confident. If indices are shrinking, that means that investors are probably are not very confident.
The Nikkei gets its name from the Nikkei shinbun, which is a trade journal and daily newspaper. This newspaper is very popular in Japan for financial news. It is sort of like the Financial Times in Europe, or the Wall Street Journal in the United States.
The Nikkei Stock Market
Sometimes people refer to the Tokyo Stock Exchange as the Nikkei stock market. That is how closely the index is associated with the Tokyo Stock Exchange. Regardless, the Tokyo Stock Exchange is actually the larger stock exchange entity, but if you use Nikkei, people will know what you are talking about.
The Tokyo Stock Exchange is the fourth largest stock exchange in the world, trailing only the New York Stock Exchange, the NASDAQ, and the London Stock Exchange. This means that the Nikkei exchange is actually the biggest exchange in Asia, bigger than even the stock exchanges in China and Hong Kong.
Japan’s economy was once the second largest economy in the world, trailing only the United States. Japanese conglomerates, likewise, were global behemoths, in many cases larger than their American and European counterparts. In the late 80’s and 90’s the Japanese economy suffered a massive bubble and deflation. The economic downturn hit property and stocks particularly hard.
Japan’s economy never fully recovered, and many Japanese companies are no longer as dominant as they once were. Regardless, the Nikkei and Tokyo Stock Exchange are still vital for the global economy. Investors around the world closely watch these two.
How Can Investors Invest In The Nikkei?
There are many options for investing in the Nikeei. Various index funds are tied to the Nikkei, Nikkei futures, and other assets. Exchange-traded funds are probably the easiest option for investing in the Nikkei 225. You should be able to buy these funds in other major financial markets, such as New York.
If you want to invest in certain major stocks and companies that are listed in Japan, you may be able to do so through an overseas broker. You can also set up a stock account in Japan through a Japanese stock broker if you’d like to get more directly involved. While there are some regulations and restrictions for foreign investors looking to invest in Japan, conditions have loosened up over the years.
In fact, investing in Japan is easier than investing in some other Asian countries, such as China, where investments are restricted. Of course, when you invest in Japan, you’d better make sure you know what you’re doing. Conditions are much different in Japan than they are in the United States, United Kingdom, or any other country for that matter.
Japan does offer great investment opportunities. With the Japanese government looking to stimulate the economy, the Nikkei could enjoy growth in the months ahead. Of course, stock markets and conditions can change rapidly, so make sure you’re doing your homework before you invest! Nikkie futures, exchange traded funds, and other tools, are a great way to diversify geographically and to invest in Asia. However, conditions can be complicated, especially for investors who aren’t familiar with Japan and its economy.