What is the Nikkei 225 and how can you trade in it?

The Nikkei 225 is the top stock market index for the Tokyo Stock Exchange. Often referred to as the 'Nikkei Stock Average' or just the 'Nikkei', it consists of the top 225 blue chip companies in Japan listed on the Tokyo Stock Exchange.

Some of the biggest components of the Nikkei include companies within electric machinery, chemicals, services and tech. Most of the companies on the index are major exporters, so the market is not only highly sensitive to the global business cycle but also to the level of the yen. Recent fears of a US recession caused Japan's stock market crash which saw the Nikkei sink by 12% at the start of August.

We look at what the Nikkei 225 is and how you can trade in it.

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What companies are on the Nikkei 225?

The Nikkei consists of 225 top companies that trade on the Tokyo Stock Exchange, many of which are global brands. 

It is a price-weighted index. Some of the top companies on the Nikkei include the likes of Sony, Canon, Nissan and Toyota.

The stocks that make the list are reviewed in April and October each year.  The first calculation took place in September 1950. The index represents the history of the Japanese economy following World War II. 

The index consists of around 35 sectors, with tech being the largest, making up almost 50%. Other industries include financials, consumer goods, material, capital goods, transportation and utilities. 

The top 10 companies include:

•  Fast Retailing 
•  Tokyo Electron 
•  Softbank Group Corp 
•  Shin-Etsu Chemical 
•  TDK Corp 
•  KDDI 
•  Recruit Holdings 
•  Fanuc 
•  Daikin Industries 

The price of the Nikkei 225 is affected by share prices of the companies in the index. A wobble in any given sector, like tech, will impact the price of the Nikkei. 

The Nikkei is therefore also sensitive to economic events such as recent interest rate changes, currency rates, earnings reports and even natural disasters which can impact companies listed in the Nikkei.

How can you trade the Nikkei 225? 

Trading in the Nikkei gives you exposure to the Japanese market. You can buy individual shares via your broker or track the index by investing in a tracker fund or an exchange-traded fund (ETF).  

When is the Japanese stock market open? 

The Japanese stock market is open between 9am to 3pm JST - Monday to Friday. The Tokyo Stock Exchange, the main stock market of Japan, is based in Tokyo and is often abbreviated as TOSHO.