How the Japanese stock market works

The Tokyo Stock Exchange traces back to 1878 and is run today by Japan Exchange Group. More than 3,000 companies are listed on it. Since April 2022 they sit in three markets: Prime for large companies, Standard for mid-sized ones and Growth for younger firms. Small regional exchanges exist in Nagoya, Fukuoka and Sapporo, but almost all trading happens in Tokyo.

Foreign investors are usually the biggest group by value traded. Japanese households have traditionally kept more of their savings in cash and bank deposits than in shares, which is one reason the government has pushed tax-free accounts such as NISA.

Trading runs in two sessions, 9:00 to 11:30 and 12:30 to 15:30 Japan time, on weekdays. Since November 2024 the afternoon session ends at 15:30 instead of 15:00, with a closing auction that sets the closing price. The market is closed on weekends, national holidays and from 31 December to 3 January.

For daily moves, each share has a price limit that depends on its price. If a share hits it, it can go no further that day. Orders settle two business days after the trade.

Listed shares trade in units of 100, so the smallest purchase is usually 100 times the share price. For an expensive stock, that can be a large sum. Some brokers sell single shares or fractions of a share, at a small extra cost or a wider price spread.

The Nikkei 225 follows 225 large companies and is the figure quoted in most news. It is price-weighted: a share with a high price moves it more than a share with a low price. TOPIX covers a much broader slice of the market and is weighted by company size, which many professional investors and funds prefer.

The Nikkei 225 has been calculated since 1950. TOPIX is published by Japan Exchange Group.

The Nikkei 225 closed at 38,915 on 29 December 1989, at the top of Japan's bubble. It then fell by more than half and took until February 2024, more than 34 years, to pass that level again. Even a large, well-run economy can have a stock market that goes nowhere for decades, especially if it starts at a very high price.

The collapse brought down famous names such as Yamaichi Securities. Since then, the exchange has pushed companies to be more shareholder-friendly. In 2023 it asked companies trading below their book value to explain how they would improve, and many have since raised dividends and bought back shares.