What is the Nikkei index?

If you have been paying attention to the stock market you have likely heard of the Nikkei index. It is an index that tracks stocks in Japan. It is also one of the most widely followed throughout the world. The reason for this is because Japan is such an important part of the global economy.

The Nikkei index is the major index of the Tokyo stock market; it is basically the Japanese version of the Dow. The name Nikkei comes from the newspaper which calculates the index. There are currently 225 companies listed in the index and they include most of the major companies in Japan. The Nikkei is considered to be one of the most important stock indexes in the world because of the size of the Japanese economy. In a lot of ways it has been used as a representative of the entire Asian market although this is starting to change due to the growth of China and other countries in importance.

The Nikkei index was first introduced in 1950 where it was the first one for a Japanese exchange. The companies that are listed on the exchange are updated every year so as to make sure that the index provides a good indication of the major companies in Japan. As new companies become major players they will be added to the index while others that have started to wane in importance will be removed. In order to make sure that it is possible to compare the index with its performance in the past it is necessary to weight each company in the index. As a result some companies are more important than others.

The Nikkei index is one of the most widely watched in the world in large part because of the wild ride that it has gone on over the years. While most stock exchange indexes show fairly steady growth with minor blips here and there, the Nikkei has gone up rapidly and the declined even faster. During the eighties the value of the Nikkei index increased by six fold, it then proceeded to plummet losing half its value in the next year. It is down more than eighty percent from its high at the end of the eighties.

One of the reasons that Nikkei is considered to be so important to the world economy is that it plays a big role on the value of the yen. Over the last few years the yen has become a major financial issue because of the very low interest rates in Japan and the amount of money that the Japanese have in savings. The result is that the yen has a huge impact on the value of most other currencies. Since the Nikkei plays a major role in the value of the yen it is something that the rest of the world has to pay attention to.