The Nikkei 225 is a price-weighted stock market index of 225 large, publicly traded companies listed on the Tokyo Stock Exchange. Calculated since 1950, the Nikkei serves as the primary benchmark for Japanese equity market performance and is widely used for index funds, derivatives, and international investment allocation decisions.

The Nikkei’s price-weighted methodology means higher-priced stocks have greater index influence regardless of company size, differing from market-cap weighted indices. The index includes major Japanese corporations across various sectors and serves as a barometer for Japan’s economic health. Nikkei futures and options provide efficient tools for hedging Japanese equity exposure.

Real-world example: Bank of Japan policy announcements cause the Nikkei 225 to rally 500 points in a single session, reflecting investor optimism about monetary stimulus supporting Japanese corporate earnings and stock market performance.