The Tokyo Stock Exchange, the beating heart of Japan’s economy and one of the world’s most important financial centers, tells an ups and downs story of innovation, growth and resistance to challenges. Established in 1878, the stock market hosts industrial giants such as Toyota and Sony, as well as innovative companies in the fields of technology and biotechnology. With reliable indices such as the Nikkei 225 and Topix, the Tokyo Stock Exchange not only shows the pulse of the Japanese economy, but also acts as a thermometer for the health of the global economy. This article will provide you with an introduction to the Tokyo Stock Exchange and provide practical guidance for successful investing in this dynamic market.
Introducing the Tokyo Stock Exchange (TSE)
History of establishment
Tokyo Stock Exchange (TSE) is known as the largest and most important stock market in Japan and one of the largest stock markets in the world. The establishment of this exchange dates back to May 15, 1878. At that time, the Tokyo Stock Exchange was established as a response to the growing need for an organized market for trading securities and financing economic activities. The first customers of this exchange were ex-samurai who were looking for a market to trade bonds that were granted to them by the government.
Throughout its history, the Tokyo Stock Exchange has faced many challenges and developments. For example, in 1943, the Tokyo Stock Exchange merged with eleven other major stock exchanges in Japan to form the United Japan Stock Exchange. The stock exchange was closed in August 1945, a few days before the bombardment of Hiroshima, and then reopened on May 16, 1949 under its current name, the Tokyo Stock Exchange.
Global importance of the Tokyo Stock Exchange
Tokyo Stock Exchange is of great global importance due to Japan’s economic position as the third largest economy in the world. This stock exchange not only acts as the main center of securities trading in Japan, but is also known as one of the most important financial markets in the world. The high volume of transactions and capital market value in the Tokyo Stock Exchange has made this market one of the main sources of domestic and foreign investors.
The Tokyo Stock Exchange hosts some of the largest and most famous companies in the world, including Toyota, Sony and Honda. Due to the extent of their international activities, these companies play an important role in attracting foreign investors to the Tokyo Stock Exchange. In addition, the Nikkei 225 index (Nikkei 225), which includes the top 225 companies in Japan, is recognized as one of the most important stock market indices globally and is used as a measure to evaluate the state of the Japanese stock market.
Management and structure of the Tokyo Stock Exchange
Tokyo Stock Exchange is managed by Japan Exchange Group (JPX). This group was formed in 2013 from the merger of the Tokyo Stock Exchange and the Osaka Stock Exchange, and its aim was to increase the efficiency and competitiveness of the Japanese financial markets. The Japan Stock Exchange Group is responsible for managing and supervising all the activities of the Tokyo Stock Exchange and is trying to facilitate the attraction of more investors by creating transparency and trust in the market.
The structure of the Tokyo Stock Exchange consists of several different sections, each of which is dedicated to a specific type of company and investor. These sectors include Prime Market, Standard Market, Growth Market and Tokyo Pro Market. Each of these sectors has specific requirements and conditions for the acceptance of companies, which are designed to ensure the quality and transparency of the market.
In addition, the Tokyo Stock Exchange has a board of directors that is primarily responsible for decision-making and policy making in this market. The members of this board include executive directors and representatives of stock exchange member companies. This board holds regular meetings to monitor the market trend and take necessary decisions to improve the performance and increase the efficiency of the stock exchange.
Finally, Tokyo Stock Exchange strives to provide a safe and efficient experience for all market participants by using advanced technologies and modern trading systems. Due to its rich history, global importance and strong management structure, this stock exchange is still known as one of the main players in the field of global financial markets.
Various sections of the Tokyo Stock Exchange
Tokyo Stock Exchange (TSE) is one of the most complex and largest stock markets in the world, which has several different sectors. Each of these sectors is dedicated to a specific type of companies and investors and has special conditions and requirements for accepting companies. In the following, we examine the various sections of the Tokyo Stock Exchange in detail:
Prime Market
The Tokyo Stock Exchange’s main market, known as the “Prime Market”, is the most important and largest part of the stock exchange. This market hosts the largest and most prestigious Japanese companies that play an important role in the domestic and global economy. Companies that are admitted to this market must meet strict conditions in terms of market capitalization, profitability and transparency.
Companies in the main market usually have a high market capitalization and regularly provide accurate and transparent financial reports. These companies include giants such as Toyota, Sony and Mitsubishi, each of which plays an important role in attracting foreign investors due to their extensive international activities. The main market of the Tokyo Stock Exchange is known as a symbol of Japan’s economic strength and stability.
Standard Market
The Standard Market of the Tokyo Stock Exchange, known as the “Standard Market”, is designed for companies that are mid-sized in terms of size and market capitalization. This market hosts companies that are not as big as the main market companies, but still have high potential for growth and development.
Companies in the standard market must meet certain requirements in terms of profitability and transparency, but these requirements are not as strict as in the main market. This market acts as a bridge between small and large companies and gives companies that are growing and developing an opportunity to attract capital and increase credit.
Growth Market
The growth market of the Tokyo Stock Exchange, known as the “Growth Market”, is dedicated to companies that are in the early stages of their growth and development. This market is especially suitable for innovative and technology-oriented companies that have a high potential for rapid growth.
Companies in growth markets are usually newly founded and may not yet be profitable, but they have innovative ideas and products that could lead to great success in the future. This market allows investors to invest in start-up and leading companies and benefit from their rapid growth.
Specialized market for professional investors (Tokyo Pro Market)
The specialized market for professional investors, known as “Tokyo Pro Market”, is dedicated to professional investors and financial institutions. This marketplace allows companies to access professional investors without having to meet the strict requirements of the public markets.
Companies on the Pro Market do not need to provide public financial reports and can negotiate privately with professional investors. This market is very suitable for companies that seek to attract capital from specific and professional sources, allowing them to continue their growth and development without public pressures.
Mothers and Jasdaq Market
The Mothers market (Market of the High Growth and Emerging Stocks) and the Jasdaq market are two other sections of the Tokyo Stock Exchange that are dedicated to start-up and high-growth companies. The Mothers market is to companies that are in the early stages of growth and have a high potential for rapid growth. This market is especially suitable for technology-oriented and innovative companies.
The Jasdaq market itself is divided into two sub-sections: Jasdaq Standard and Jasdaq Growth. Jasdaq Standard is dedicated to companies that have stable profitability, while Jasdaq Growth is dedicated to companies that are in the early stages of growth and development and are looking to attract capital to increase their growth.
Both Mothers and Jasdaq marketplaces allow start-ups to quickly reach larger and more established markets by attracting investors interested in growth and innovation. These markets act as a launching pad for innovative companies, allowing them to achieve great success by raising capital and building credibility.
The various sections of the Tokyo Stock Exchange are designed to cover the diverse needs of companies and investors and enable them to operate in a transparent and efficient environment. This complex and multi-layered structure allows the Tokyo Stock Exchange to play its role in attracting capital and facilitating trade as one of the most important financial markets in the world.
How the Tokyo Stock Exchange works
Working hours and days
The Tokyo Stock Exchange (TSE), as one of the most important and largest stock markets in the world, has specific working hours and days that are set according to Japan’s local time. The working hours of the Tokyo Stock Exchange are designed in such a way that local and international investors can easily trade in this market.
The Tokyo Stock Exchange consists of two trading sessions during the day:
- Morning session: from 9:00 am to 11:30 am
- Afternoon session: from 12:30 pm to 3:00 pm
This timing allows investors to trade in two separate time frames and benefit from different market opportunities. In addition, the Tokyo Stock Exchange operates from Monday to Friday and is closed on Japanese public holidays. Official holidays include New Year holidays, Golden Week and summer holidays, during which no trading is done in the stock market.
Types of transactions
The Tokyo Stock Exchange offers various types of trading, each designed for the specific needs of investors and companies. These transactions include the following:
- Spot Trading: This type of transaction includes buying and selling stocks in cash and with immediate settlement. Cash trading is usually suitable for investors who are looking to buy or sell stocks quickly and do not want to make long-term commitments.
- Futures Trading: In this type of trading, contracts are concluded to buy or sell shares in the future at a specified price. Futures allow investors to take advantage of future price fluctuations and use this tool to manage their risks.
- Options Trading: Options trading includes contracts that give the buyer the right (but not the obligation) to buy or sell stocks in the future at a specified price. This type of trading allows investors to take advantage of price fluctuations or manage their risks by paying a premium.
- Margin Trading: In this type of trading, investors can buy or sell stocks using credit (loan) from brokers. Margin trading allows investors to increase their profits by using financial leverage, but at the same time bear more risks.
- Algorithmic Trading: This type of trading is based on algorithms and computer programs that buy and sell stocks automatically. Algorithmic trading allows investors to trade more quickly and accurately and take advantage of short-term market opportunities.
Trading units
Trading units in the Tokyo Stock Exchange refers to the way of buying and selling shares in this market. Each share on the Tokyo Stock Exchange is traded as a “trading unit” or “Lot”. Trading units means a certain number of shares to be bought or sold at once. The number of shares in each trading unit varies according to different companies and is determined by the companies themselves.
In general, trading units in the Tokyo Stock Exchange are designed to facilitate trading and allow investors to easily buy and sell shares. Some companies may have smaller trading units (e.g. 100 shares) and others larger units (e.g. 1000 shares). This diversity in trading units allows investors to trade based on their needs and financial ability.
Also, the Tokyo Stock Exchange has provided the possibility of “Odd Lot Trading” which allows investors to buy or sell a smaller number of shares that are less than the trading unit. This type of trading is especially useful for investors looking to buy or sell smaller amounts of stocks.
Using advanced technologies and modern trading systems, Tokyo Stock Exchange strives to provide a safe and efficient experience for all market participants. Due to its rich history, global importance and strong management structure, this stock exchange remains one of the main players in the field of global financial markets and allows investors to trade in a transparent and organized environment.
Important indices of the Tokyo Stock Exchange
Nikkei 225 index
This index is one of the most famous and reliable indices of the Tokyo Stock Exchange, which is used to evaluate the performance of the Japanese stock market. This index was first introduced on September 7, 1950 and includes 225 large and reputable Japanese companies traded on the Tokyo Stock Exchange. The selection of companies in the Nikkei 225 index is based on criteria such as liquidity, volume of transactions and representation of different economic sectors.
The Nikkei 225 index works as a price-weighted index, in the sense that the weight of each company in the index is determined based on its stock price. This index is calculated and published daily by the Nikkei economic newspaper and is recognized as one of the main criteria for evaluating the performance of the Japanese stock market as well as a leading index in global financial markets.
Other Indices
In addition to the Nikkei 225 index, the Tokyo Stock Exchange has several other indices, each of which represents different parts of the market and is used to evaluate the performance of various companies and industries. Some of these indices are:
- Topix index (TOPIX): Topix index (Tokyo Stock Price Index) is one of the important indices of the Tokyo Stock Exchange, which includes all the companies in the first section of the Tokyo Stock Exchange. This index works as a capitalization-weighted index, in the sense that the weight of each company in the index is determined based on its market value. TOPIX is used as one of the main indices to evaluate the overall performance of the Japanese stock market.
- Topix 100 index (TOPIX 100): This index includes 100 large and reputable companies from among the companies in the Topix index. The Topix 100 allows investors to individually evaluate the performance of Japan’s largest companies.
- Topix Mid 400 and Small 500 index: These indexes include medium and small companies in the Topix index, respectively. These indices allow investors to evaluate the performance of smaller and medium-sized companies separately and to take advantage of investment opportunities in these categories.
- JASDAQ index: This index includes companies in the JASDAQ market, which is dedicated to start-up and high-growth companies. The JASDAQ index acts as a value-weight index and evaluates the performance of innovative and young companies.
Prominent companies on the Tokyo Stock Exchange
Largest companies by market capitalization
The Tokyo Stock Exchange is home to some of the world’s largest and most prestigious companies, which rank at the top by market capitalization. These companies not only play an important role in the Japanese economy, but also have a significant impact on the global economy. Some of the largest companies by market capitalization are:
- Toyota Motor Corporation: Toyota is known as the largest car manufacturer in the world and has a very high market capitalization. This company plays an important role in the global automotive industry and its products are sold all over the world.
- Sony Corporation: Sony is one of the largest electronic companies in the world and operates in various fields including the production of electronic products, video games, music and movies. This company is known as one of the symbols of innovation and technology in Japan.
- Mitsubishi UFJ Financial Group: This company is one of the largest financial institutions in Japan and the world that provides banking, financial and insurance services.
- SoftBank Group Corp: SoftBank is a multinational investment company that operates in various fields including telecommunications, technology and investment.
Famous global companies
The Tokyo Stock Exchange hosts companies that are world-renowned and whose products and services are known around the world. Some of these companies are:
Nintendo (Nintendo Co, Ltd): Nintendo is one of the most famous video game companies in the world, producing consoles and popular games such as the Mario and Zelda game series.
Panasonic Corporation: Panasonic is one of the largest manufacturers of electronic products and home appliances in the world.
Canon (Canon. Inc): Canon is one of the world leaders in the production of cameras, printers and imaging equipment.
Honda Motor (Honda Motor Co, Ltd): Honda is one of the largest car and motorcycle manufacturers in the world.
These companies not only play an important role in the Japanese stock market, but also have a significant impact on various industries globally. The presence of these companies in the Tokyo Stock Exchange helps to attract international investors and increases the credibility and trust in this market.
Major developments of the Tokyo Stock Exchange
Periods of growth and recession
From the 1950s to the 1980s, the Tokyo Stock Exchange saw significant growth, especially in the post-World War II period as Japan rapidly industrialized and became one of the largest economies in the world. In the 1980s, the Tokyo Stock Exchange reached its peak, with the Nikkei 225 reaching its all-time high.
But this period of growth ended with the bursting of the economic bubble in the early 1990s. Stock and real estate prices plummeted, and the Tokyo stock market entered a long period of stagnation known as Japan’s “Lost Decade.” The recession had profound effects on the Japanese economy and the Tokyo stock market.
The effects of economic crises on the Tokyo Stock Exchange
Global economic crises have also had important effects on the Tokyo Stock Exchange. The Asian financial crisis in 1997 caused a sharp decline in stock prices, and many Japanese companies faced financial difficulties. In addition, the global financial crisis in 2008 also dealt a heavy blow to the Tokyo Stock Exchange. The Nikkei 225 index reached its lowest level in the last few decades during this period.
Economic crises increased volatility and reduced investor confidence in the market. However, the Tokyo Stock Exchange was able to gradually overcome these crises and experience a return to growth by implementing appropriate economic and financial policies as well as structural reforms.
Reconstruction and structural reforms
Following several economic crises and recessions, the Tokyo Stock Exchange undertook restructuring and structural reforms. These reforms included updating trading technologies, strengthening regulatory regulations and increasing transparency in the market. One of the most important reforms took place in 2013, when the Tokyo Stock Exchange merged with the Osaka Securities Exchange to form the Japan Exchange Group.
The merger helped the Tokyo Stock Exchange to become a stronger and more efficient entity and strengthened its position as one of the largest and most prestigious stock markets in the world. The Tokyo Stock Exchange also updated its trading systems to increase the speed and accuracy of trading and increase investor confidence in the market.
How to accept and list companies in the Tokyo Stock Exchange
Listing requirements and conditions
To be accepted and listed on the Tokyo Stock Exchange, companies must meet certain criteria. These requirements include financial, operational and governance criteria. Some of these requirements are:
Minimum market capitalization: Companies must have a certain minimum market capitalization, which varies depending on the type of market (Section I, Section II, or JASDAQ).
Profitability: Companies must demonstrate that they have been profitable in recent years and have the ability to generate sustainable profits.
Liquidity: The company’s stock should have enough liquidity so that traders can buy and sell easily.
Corporate ownership: Companies must have an appropriate ownership structure and transparency in financial reporting.
Admission process
The process of admission to the Tokyo Stock Exchange includes several steps:
Application for admission: Companies must first submit their application for admission to the Tokyo Stock Exchange. This request includes sending financial documents, audit reports and information related to the governance structure of the company.
Evaluation by Admissions Committee: The Tokyo Stock Exchange has an Admissions Committee that reviews and evaluates applications. This committee checks whether the applicant company has met all the required requirements and criteria or not.
Visit and interview: In some cases, Tokyo Stock Exchange may visit the company and interview the company’s management to ensure the accuracy of the information provided.
Decision: After a thorough evaluation, the admissions committee decides whether the company can be listed on the Tokyo Stock Exchange. If approved, the company will be allowed to trade on the Tokyo Stock Exchange.
Preparation and IPO: After acceptance is approved, the company must prepare for the initial public offering (IPO). This includes setting the offering price, preparing final financial reports and advertising to attract investors.
With this strict and transparent process, the Tokyo Stock Exchange ensures that only reputable and qualified companies are admitted to the market, which helps maintain trust and transparency in the market.
Criticism of the Tokyo Stock Exchange
Strengths and opportunities
The Tokyo Stock Exchange is one of the largest and most prestigious stock markets in the world and has many strengths and opportunities that make it an attractive destination for investors:
Market size and liquidity: The Tokyo Stock Exchange is one of the largest stock markets in the world, hosting thousands of large and small companies. This size means high liquidity, meaning investors can easily and quickly buy and sell their shares.
Portfolio diversification: The Tokyo Stock Exchange provides many opportunities for investors to diversify their portfolios. From large multinational companies such as Toyota and Sony to start-ups and innovative companies in the technology and biotechnology sector, investors can invest in various economic sectors.
Japan’s stable and advanced economy: Despite various challenges, Japan’s economy is one of the most stable and advanced economies in the world. This stability and progress increases the credibility and trust of investors to the Tokyo Stock Exchange.
Innovation and technology approach: Japan is known as one of the world leaders in the field of innovation and technology. Many Japanese companies operate in various fields of technology, electronics, automobiles, and robotics, which provide great opportunities for investment.
Structural reforms and transparency: Tokyo Stock Exchange has increased transparency and confidence in the market by implementing structural reforms and strengthening supervisory regulations. These reforms have helped to attract domestic and foreign investors.
Challenges and criticisms
Despite its strengths, the Tokyo Stock Exchange also faces certain challenges and criticisms that must be addressed:
Economic recession and aging population: One of Japan’s biggest challenges is the long-term economic recession and aging population. These factors can limit the economic growth and profitability of companies.
Market fluctuations: Tokyo Stock Exchange is affected by the fluctuations of international markets due to its dependence on the global economy. Global economic crises can quickly have negative effects on the Tokyo stock market.
Complicated regulations: Some investors believe that the regulations and admission processes in the Tokyo Stock Exchange are complicated and time-consuming. This can prevent new companies from entering the market and limit investment opportunities.
Global Competition: The Tokyo Stock Exchange faces intense competition from other stock markets such as New York and London. This competition can make it more difficult to attract new investors.
Geopolitical risks: Japan is located in a region that is affected by geopolitical and security tensions. These tensions can negatively affect the stock market.
Guidance for investors on the Tokyo Stock Exchange
To succeed in investing in the Tokyo Stock Exchange, it is necessary to pay attention to the following key points:
Fundamental and technical analysis: performing detailed fundamental and technical analysis is necessary to evaluate companies and stocks. Examining financial reports, profitability trends and industrial status of companies can help to make better decisions.
Diversification of the portfolio: Diversification of the investment portfolio can reduce risks. Investing in different industries and large and small companies makes losses compensated in case of stagnation in one sector.
Monitoring global economic trends: The Tokyo Stock Exchange is influenced by global economic trends. Monitoring global economic and political events and analyzing their effects on the Japanese stock market is very important.
Use of financial advisors: Using the services of financial advisors and market experts can help investors make better decisions and take advantage of existing opportunities.
Risk Management: Determining risk management strategies and using financial tools such as Stop-Loss can help protect funds against market fluctuations.
Considering the complexities of investing in the Tokyo Stock Exchange and the importance of choosing a reliable broker, using the services of experienced international brokers can be a solution. Meanwhile, MondFX broker is known as one of the most reliable brokers for entering the international financial markets, including the Tokyo Stock Exchange. By providing advanced trading platforms, powerful analytical tools and professional support, this broker enables investors to operate more confidently and efficiently in global markets. Due to the reputation and experience of MondFX in the field of international transactions, investors who intend to enter the Tokyo Stock Exchange can take an important step towards success in this potential market by using the services of this broker.
Resources and tools for investors
To succeed in investing in the Tokyo Stock Exchange, it is very important to have access to the right resources and tools:
Tokyo Stock Exchange website: The Tokyo Stock Exchange official website provides comprehensive information about companies, indices and market events that can help investors.
Financial and research reports: Using financial and research reports from reputable sources such as Bloomberg, Reuters and Nikkei can help you better analyze the market and companies.
Trading software and platforms: Using advanced trading software and platforms that provide real-time information and technical and fundamental analysis tools allows investors to make quick and effective decisions.
Training courses and workshops: Participating in training courses and workshops related to the stock market and investment can provide the necessary knowledge and skills to succeed in the market.
According to these tips and using appropriate resources and tools, investors can achieve success in the Tokyo Stock Exchange and take advantage of the opportunities available in this market.
Conclusion:
As one of the largest and most important stock markets in the world, the Tokyo Stock Exchange plays a vital role in the economy of Japan and the world. With its rich history, diversity of companies and complex structure, this stock exchange provides various opportunities for domestic and foreign investors. Despite challenges such as economic recession and global competition, the Tokyo Stock Exchange has maintained its position as one of the world’s most important financial centers by implementing structural reforms and using advanced technologies. In order to succeed in this market, investors must pay attention to fundamental and technical analysis, risk management, and monitor global economic trends, and use appropriate resources and tools.