Everything You Need to Know About the Japanese Nikkei Index N225
Overview of the Index
The Nikkei Index is considered the most important and powerful stock market index in Japan.
It includes 225 Japanese companies and reflects the strength and performance of the Japanese market.
It serves as a key indicator of the overall state of Japan’s financial markets.
In this article, we will highlight the main points regarding the index’s components, methods of investment, its advantages and disadvantages, along with practical tips that can help in trading.
What is the Nikkei Index?
The Nikkei Index consists of the 225 largest Japanese companies by market capitalization and liquidity. It covers several important and diverse sectors, including services, industry, and others.
It was established in 1950 and calculated retroactively to May 16, 1949.
The Nikkei economic newspaper is the official body responsible for managing the index.
Name: Nikkei 225
Country: Japan
Currency: Japanese Yen
Exchange: Tokyo Stock Exchange (TSE)
Number of Companies: 225 Japanese companies
Basic Data for the N225 Symbol
Symbol on platforms: N225 or JP225
Measured in points, not percentages, and calculated based on the average price of the shares (Price-Weighted Index) rather than market capitalization.
This means that stocks with higher prices have greater influence, even if their market capitalization is smaller.
Companies are reviewed annually in October to ensure their suitability.
Key Sectors in the Index
Technology: 48.21%
Consumer Goods: 24.73%
Materials: 12.68%
Healthcare: 10.27%
Capital Goods: 9.25%
Consumer Staples: 3.26%
Major Companies Listed in the Index
Sony
Toyota
Mitsubishi
Honda
Nissan
Nintendo
Panasonic
Nomura Holdings
SoftBank
Daiwa Securities
ANA Holdings Inc
Aozora Bank, Ltd
Mizuho Financial Group, Inc
Hitachi, Ltd
NEC Corp
Omron Corp
Asahi Group Holdings, Ltd
AGC Inc
Trading Hours
Trading hours are from 9:00 am to 11:30 am Tokyo time, followed by a one-hour break, and then from 12:30 pm to 3:00 pm.
For futures and CFD trading, the index can be traded 24 hours a day from Monday to Friday.
Ways to Trade and Invest in the Index
1. Trading directly on the index through brokers using Contracts for Difference (CFDs).
2. Trading in futures contracts.
3. Investing through Exchange Traded Funds (ETFs), such as the Nikkei 225 ETF listed on the Tokyo Stock Exchange.
4. Trading using options.
Advantages of Trading the Index
1. Represents the largest 225 Japanese companies, reflecting the overall strength of Japan’s economy.
2. High liquidity with easy entry and exit from the market.
3. Regular reviews ensure only the strongest companies remain in the index.
4. Variety of investment instruments, such as ETFs, CFDs, and options.
5. Opportunity to benefit from daily price fluctuations, suitable for short-term trading.
6. Wide sector diversity provides traders with multiple options.
Disadvantages of Trading the Index
1. Affected by movements in the Japanese Yen.
2. Sensitive to central bank decisions and interest rate policies.
3. Impacted by geopolitical events.
4. Calculated using the price-weighted method, similar to the Dow Jones, which is considered less fair.
5. Limited to trading on the Tokyo Stock Exchange.
6. Highly volatile due to global news, especially U.S. dollar-related events.
7. Focused mainly on large corporations, excluding medium and small companies.
8. Heavy concentration in the technology and electronics sector, making the index vulnerable to downturns in this industry.
Important Tips Before Trading
1. Monitor index movements closely and update technical analysis daily.
2. Follow news related to both Japan and the United States.
3. Track the performance of Japan-focused investment funds.
4. Keep a close eye on central bank announcements, as they have a direct impact on the index.
5. Trade cautiously and apply strict risk management practices.
