Nikkei is Japan’s main stock exchange, and is the second largest in the world. It is just behind the Dow Jones Industrial Average in the United States. Japan’s top 225 blue-chip companies on the Tokyo Stock Exchange are part of Nikkei. There are over 2,000 companies listed on the Tokyo Stock Exchange.The Tokyo Stock Exchange is the most active in the Asia-Pacific area. Other Asia-Pacific stock exchanges are in Bombay, Malaysia, Hong Kong, Australia and New Zealand, but they are not nearly as active as the Tokyo Stock Exchange.
Trading takes place at the Tokyo Stock Exchange which provides monitoring and supervising of trading for Japan’s stocks. The Tokyo Stock Exchange has had its problems with technology in the past that have affected all trading that occurred there. For instance, in 2005, the exchange was only able to operate for 90 minutes due to serious technical issues which caused a system failure. This was the longest interruption in the history of the exchange. Again in 2006, however, the exchange was required to close early due to trade volume exceeding the 4.5 million trades per day capacity of its technical system.
Despite a 61.4% decline between 2000 and 2003, Nikkei has experienced some gains over the past years. Canon, Panasonic, and Sony continue to do well. There is concern over the fact that even though the Japanese economy is strong, the Japanese stock market is somewhat weak. The slow global economy definitely has an effect on it as well as political support or non-support from Japanese government and the value of the yen.
This past summer, Sony posted fiscal 2011 results that showed a profit between 10 and 36 billion yen. Other major Nikkei companies have shown profits as well, but there have been drops in stocks of companies who rely on sales abroad. Nintendo dropped almost two percent on quarterly losses, and 70% of their sales are from abroad.
The Japanese yen is the highest that it has been in 15 years and is very strong. This puts pressure on those who export goods as well as the Japanese stock market. This is because income from overseas sales is reduced when repatriated back to Japan.The strong Japanese yen makes Japanese exports more expensive for those from other areas of the world economy to buy, and definitely affects the Japanese stock market in a negative way. A chief strategist in Tokyo at Tokyo Asset Management Co. said that, “Some companies may cut their earnings forecasts if the yen goes to the low 80s, prompting people to sell exporters.”
Despite some concern among Japanese investors over the falling global economy, the yen’s strength is a positive element in the situation. However, many Japanese investors do not want to take risks with the U.S. economy not fully recovered due to the fact that U.S. market capitalization is 4 trillion U.S. dollars in Japan. Concerns about banks in America have affected the stock market only slightly, with less than a one percent decline reported after American banks reported an increase in house foreclosures. Most Japanese experts believe that Japanese banks probably will not be affected by this problem in the U.S.
Many comparisons have been made between Nikkei and the Dow Jones Industrial Index, possibly due to the similar rises and falls that they have both experienced. The all-time high or low for the Nikkei was 75.56%, while the down fell by 21.90%. In 1998, the Nikkei was down 43.22% while the Dow was up 18.78%, and in 2010, the Nikkei was down by 9.92% and the Dow was up by 6.08%.