Discover the Tokyo Price Index (TOPIX)
The Tokyo Price Index—commonly referred to as TOPIX—is a comprehensive metric for stock prices listed on the Tokyo Stock Exchange (TSE). As a capitalization-weighted index, TOPIX comprises all firms in the ‘first section’ of the TSE, which includes Japan’s largest companies by market capitalization. Smaller companies are grouped within the ‘second section’ of the TSE.
Key Highlights
- Comprehensive Market Representation: TOPIX is calculated and published by the Tokyo Stock Exchange, tracking Japan’s largest companies.
- Market Comparison: Distinct from the Nikkei 225, which is price-weighted, TOPIX offers a more inclusive representation by encompassing only first section companies.
- Investment Opportunities: Investors can engage with TOPIX through several exchange traded funds (ETFs), such as the TOPIX Core 30 ETF, simplifying the process of tracking its performance.
Understanding TOPIX
The Tokyo Stock Exchange (TSE), Japan’s largest stock exchange, is fundamental to calculating and publishing TOPIX. Unlike the Nikkei 225, which features only the top 225 blue chip companies and is price-weighted, TOPIX offers a broader perspective of the market by reflecting price changes of Japan’s largest companies.
TOPIX Sector Indices
TOPIX demonstrates the current market capitalization of companies, with the base date set on January 4, 1968. This index is an instrumental benchmark for investors aiming to gauge market trends. Sector Indices: The TOPIX sector indices classify constituent companies into 33 different categories as defined by the Securities Identification Code Committee. These categories represent various industrial sectors such as:
- Construction
- Textiles and apparels
- Nonferrous metals
- Machinery
- Electric power and gas
- Transportation
- Retail trade, banks, and more.
TOPIX Subindices
Additional subindices further extend the function of TOPIX, including:
- TOPIX New Index Series
- Size-based TOPIX subindices
- Tokyo Stock Exchange Composite Index Series
- Tokyo Stock Exchange Dividend Focus 100 Index
- Tokyo Stock Exchange REIT Property Sector Index Series
- Tokyo Stock Exchange Mothers Index
The Transition to Free Float Index
Transitioning from a system based on total outstanding shares to one focused on shares available for trade (free float) began in 2005 and completed in mid-2006. This significant shift better represented actual market offerings by excluding shares held for business alliances (keiretsu) from index weightage.
Special Considerations
The TOPIX Core 30 Index is a specialized, capitalization-weighted index focusing on the 30 most liquid and large-cap stocks within the TOPIX. Comprised of iconic Japanese firms like Honda, Canon, Mitsubishi, Sony, and Toyota, this index aids investors with accurate market insights. While indexes in themselves can’t be purchased, various ETFs such as the TOPIX Core 30 ETF, managed by Nomura Asset Management Company, provide avenues for direct investment in similarity to the index’s composition.
Related Terms: Nikkei 225, stock exchange, market capitalization, index investing, exchange traded funds.
