Many traders choose to invest in the Japanese stock market owing to the Japanese government’s success in building a market renowned for its transparency, integrity and stability.
Japan can easily boast of its market-oriented economy, which is the third largest in the world measured by nominal GDP and the fourth largest by purchasing power parity.
Additionally, Japan is included in the G7, the group of seven countries with the largest IMF-described advanced economies, representing 58% of the global net wealth. The G7 includes Japan, Canada, the UK, the US, France, Germany, and Italy.
The “Land of the Rising Sun” is the cradle of some of the most highly-valued global brands in the sphere of electronics, car manufacturing, renewables, transport, heavy industry and trading. Fun fact: Japan is the third largest automobile manufacturing country in the world.
The Japanese stock market provides investors and traders with well-functioning capital markets, characterised by diversity and deep liquidity. The Japanese stock market lists the shares for some of the world’s most recognised brands, such as technology companies Sony and Toshiba, and car manufacturers Nissan and Mazda.
Japan Exchange Group
The Japanese stocks are presented by the Japan Exchange Group, also known as JPX, which operates multiple securities exchange markets. It was formed by the merger of two many Japanese entities – the Tokyo Stock Exchange and the Osaka Securities Exchange – on 1 January 2013.
JPX provides its users with reliable venues for trading securities and listed derivatives instruments. The group also offers clearing and settlement services through a central counterparty, and conducts trading oversight to maintain the integrity of its markets.
The Japan Exchange Group lists 3,656 companies as of 5 March 2019, making it the foremost stock market in Asia and the world's third largest securities exchange, following the New York Stock Exchange (NYSE) and NASDAQ by market capitalisation.
The Tokyo Stock Exchange (TSE) was founded on 16 May 1949, but its origins go back to 1878 when it launched as Tokyo Kabushiki Torihikijo on 15 May of that year.
The TSE divides stocks into three different groups based on the scale of the business: the First Section (for large companies); the Second Section (for mid-sized companies); and the Mothers section (for high-growth startups).
The main indices tracking the TSE are the J30, the TOPIX Index and the Nikkei 225.
The Osaka Securities Exchange Co., Ltd. (OSE) is the second largest securities exchange in Japan. It was established in April 1949. In spite of its name, trading on the Osaka Stock Exchange currently takes place in Tokyo.
In July 2006, the exchange launched its newest futures contract, the Nikkei 225 mini, which is one-tenth of a size of the original Nikkei stock market index. The innovation was warmly welcomed and became very popular among Japanese investors at the time.
Japanese stocks to invest in
While there are a larger number of Japanese stocks, one of the most popular indices is the Nikkei 225, also known as Japan 225 or Nikkei. It is the oldest Asian stock index. The Nikkei was introduced in May 1949, around the same time that the country’s economy began to recover after World War II. The index was named after the Nikkei, a Japanese economic newspaper, which has been calculating the index since 1950.
The Japanese stock index, the Nikkei 225, is popular with investors around the world. The index embraces 225 of the largest domestic stocks, traded on the TSE, chosen from the most liquid shares in the exchange’s First Section. The list of companies represent various industry sectors (e.g. technology, financial, consumer goods, capital goods, materials, transportation, etc.) The Nikkei is referred to as a national benchmark index and is a major indicator of the overall performance of the Japanese stock market.
All of the shares offered on the Nikkei 225 are highly liquid. As such, the Nikkei 225 is often compared to the Dow Jones Industrial Average Index (DJIA). In fact, these two are identical in that both are price-weighted, which means that stocks with a higher price will have a higher weighting and have more influence over the index’s performance. Moreover, between 1985 and 1995, the Nikkei was licensed to use the Dow’s name. In the past, it has been known as the Nikkei Dow-Jones Stock Price Average, or the TSE Dow.
The composition of the indices is reviewed by Nikkei newspaper every October in order to ensure it adequately represents the overall performance of the market. Stocks with high market liquidity may replace those with lower ones; the balance of the sectors is also taken into consideration. Additional changes to the index can take place in times of instability, such as the bankruptcy of a company or a merger.
A lot of traders choose to trade with the Nikkei stock market index out of all other Japanese stocks as it offers exposure to substantial market price volatility, as well as daily fluctuations. It is especially alluring for the day traders who profit from short-term price movements. The index serves as the underlying asset for a wide range of the derivative financial instruments, including futures and options, funds and exchange-traded funds (ETF).
One of the easiest ways to trade Nikkei 225, nonetheless, is through contracts for difference, or CFDs. A contract for difference allows traders to go short or long on an asset without taking ownership of it. In this case, traders speculate on the price movements.
How to trade Nikkei 225 CFDs
The Nikkei 225 offers an exceptional way to gain the access to the Japanese stock market without a need to analyse the performance of individual companies. It benefits traders as it provides them with long trading hours, a high degree of liquidity and generally tight spreads.
Trading the Nikkei stock market index is easy with CFDs. A contract for difference is a type of a contract between two parties, typically the "buyer" and "seller", in order to profit from the price difference when opening and closing the trade. With that said, using CFDs to trade the Nikkei 225 will allow a person to go long or short on the market without having to deal with conventional exchanges.
Since the Nikkei 225 index is made up of a wide cross-section of liquid trading instruments, it has decent volatility and volume, making it very attractive to CFD traders around the world.
Nikkei 225 trading hours
The main trading hours for the Nikkei 225 are between 9:00 – 11.30, and 12:30 – 15:00 (GMT +09:00) from Monday to Friday.
If you choose to trade CFDs, you can buy and sell the shares of the Nikkei 225 Index (J225), as well as follow its prices live in JPY with the comprehensive price chart on Capital.com:
Monday to Thursday, 00:00 – 22:00 and 23.01 – 00.00
Friday, 00.00 – 22.00
Sunday, 23.01 – 00.00
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.