The Tokyo Stock Exchange will broaden the range of stocks that are included in Japan’s benchmark Topix index while reducing their number, as it seeks to boost its appeal as an investable gauge.
Companies listed in the Standard and startup Growth markets will be considered for inclusion, with the first review to take place in October 2026, TSE operator Japan Exchange Group said in a statement Wednesday. Currently, only those in the Prime market of large caps are included.
The number of companies in the gauge will be reduced to about 1,200 in the next review, in 2028, JPX CEO Hiromi Yamaji said in a briefing in Tokyo the same day. The Topix index currently includes more than 2,000 stocks, and at least ¥83 trillion ($526 billion) of assets were linked to the gauge as of last year.
A greater emphasis will be placed on liquidity, and phased weighting reductions of companies with a tradable share market cap of less than ¥10 billion is in progress, according to the statement.
"While the number of constituents may still seem like a lot, actively replacing them will certainly boost confidence in the companies that remain, and in the index,” said Masayuki Doshida, senior market analyst at Rakuten Economic Research Institute. "The impact seems positive.”
Japan Exchange Group restructured its market and introduced the current sections — Prime, Standard and Growth — in April 2022 to boost the stocks’ appeal and understandability to foreign investors.
Companies that were in the First Section, now the Prime market, at the time of restructuring remained in the current Topix even if they chose to be listed in Standard or Growth markets.