The Tokyo Stock Exchange, or TFE, is one of the largest stock markets in all of Asia, with more than 3.3 billion shares exchanged every trading day. The exchange supports the trading of bonds and derivatives in addition to stocks.
The economic situation in Japan
Japan is the second country in the world in terms of economic development, the third in nominal GDP and the fourth in PPP (public-private partnership). In 2014, the Japanese economy ranked 28th in the world in terms of per capita GDP. The country is one of the most innovative powers in the world, having the largest electronic industry and patent documentation. Japan is also the largest lender in the world with a leading indicator of government debt. The country has 13.7% of private financial assets, valued at 13.5 trillion US dollars and numbering 54 Fortune Global 500 companies. However, the Japanese economy is facing stiff competition from China and South Korea.
There are a number of problems in the Japanese economy that are not a secret. Among the largest: an aging workforce, a high level of public debt and constant deflation. But modest Japanese stock prices already cover this, which means great upside.
Historical foundation
The history of the Tokyo Stock Exchange dates back to the 1870s, when a securities system was created in Japan and a public discussion of bonds began. The stock exchange was founded on May 15, 1878, and trading on the exchange began in June of that year.
Between August 10, 1945 and April 1, 1949, official trading on the exchange was suspended due to war. After several post-war reorganizations, the TFB became the largest of the five exchanges in Japan, including the Sapporo Securities Exchange, Osaka Securities Exchange, and the Nagoya and Fukuoka Stock Exchange.
July 1, 1969 TFE introduced TOPIX (Tokyo Stock Price Index), which is a composite index of all domestic shares listed on the stock exchange. TOPIX is considered the best indicator of the financial condition of the Japanese stock market.
The owner of the Tokyo Stock Exchange is Japan Exchange Group, Inc., a holding company with subsidiaries, which includes Osaka Securities Exchange Co., Ltd. (OSE), as well as the Tokyo Stock Exchange and Japan Securities Bank.
Tokyo Stock Price Index
The Tokyo Stock Exchange's stock indices, known as TOPIX and Nikkei 225, is an important stock index for the stock exchange in Japan, tracking all domestic companies in the first section of the stock exchange. In the first section of the TFE, 1,669 companies are registered, and the market value of the index was 197.4 trillion Japanese yen.
This indicator has moved from a system where the company's weighting is based on the total number of shares in circulation for weighting, depending on the number of shares available for trading (called free float). This transition took place in three stages, starting in October 2005, and was completed in June 2006. Although this change is technical, it had a significant impact on the weight of companies in the index, as many companies in Japan have significant stocks of stocks of their business partners in complex business alliances, and such stocks are no longer taken into account when calculating the weight of companies in the index.
Japan exchange group
Japan Currency Group (JPX) is a private holding corporation that facilitates the trading of financial securities in Japan. Empowered by the 2008 Financial Instruments and Exchanges Act, JPX provides an exchange infrastructure that allows you to trade futures, debt instruments and derivatives. Based in Tokyo, it is one of the world's elite exchanges and has a market capitalization of $ 4.48 trillion. This makes JPX the leading corporation in Asia and the third largest global corporation.
JPX has three main subsidiaries, each of which specializes in a specific market function: Osaka Exchange, Tokyo Stock Exchange and Japan's Exchange Rate Regulation.
The TFB operates as Japan's central securities market and provides the lion's share of JPX's total liquidity.
Tokyo Stock Exchange Members
Membership on the exchange is a limited number of positions that allow the holder to make transactions on his behalf or on behalf of the client. The main participants of the stock exchange:
- companies that conduct operations at their own expense or in favor of the client are regular members;
- intermediary companies between regular members - saytori;
- companies that connect the stock markets and perform special operations, - special participants;
- non-banking securities companies (associated with banks).
Saitori - members of the TFB, acting as intermediaries between brokers.
Organization and principles of the Tokyo Stock Exchange
By market capitalization, the TFE is only ahead of the New York Stock Exchange. More than eighty percent of the country's stock exchange falls on Tokyo; the main participants are owners of securities of the Tokyo Stock Exchange. The listing requirements are as follows - the project must be approved by the relevant exchange authorities and cover the following information: offered securities and their data, company assets and liabilities, group management, investor rights, profit and loss, as well as financial forecasts. Once the project is approved, the company gains access to the exchange as its member.
Only twenty percent belong to individual owners on the exchange, the remaining eighty percent are distributed between financial and insurance companies. Owners of shares in Tokyo do not count on dividends, but on raising the price of shares and earning income from the sale at the highest price.
Up to 80 percent of all shares in Japan are sold and bought on the Tokyo Stock Exchange. 1517 registered firms account for more than 25 percent of all goods and services.
Facts and Figures
It is interesting:
- The latest report (August 2018) of the TFE shows that there are about 3636 companies on the exchange.
- The same 3636 listed companies have a total market capitalization of $ 6.05 trillion.
- About 800 million shares are exchanged annually at the TFE.
- In August 2018, an average of 3.3 billion shares were exchanged in the amount of 21.5 billion US dollars.
- The most important index traded on the TFE is TOPIX, which includes TOPIX, TOPIX 1000, TOPIX Small, TOPIX 500, TOPIX Mid, TOPIX Core 30 and TOPIX Large 70.
- In addition to TOPIX, Nikkei 225 is recognized as one of the world's major stock indices today.
Incidents
The exchange stopped working on August 10, 1945 due to American atomic bombings, and after the exchange was placed, their troops occupied. The TFB became the headquarters for the US military until January 1948, which also became the new government. Gradually, power returned to the Japanese government.
On November 1, 2005, trading on the exchange stopped almost the whole day due to a trading system failure.
In January 2006, the number of transactions concluded at the TFE exceeded 4,500,000, and trade stopped for 20 minutes. The exchange was forced to take measures to modernize computer systems to prevent system failures in the future.
TFB opening hours
The standard trading hours for most exchange products listed on the TFE are from 09:00 to 11:00 and from 12:30 to 15:00. Trading hours related to products include:
- Japanese Government Bonds (JGBs) 13:00 to 13:30 (09:30 to 10:00).
- Foreign bonds denominated in foreign currency from 13:30 to 14:00 (from 10:00 to 10:30).
- Direct bonds from 10:00 to 11:00.
- Derivatives from 09:00 to 11:00 and from 12:30 to 15:10 (from 09:00 to 11: 10).
- JGB derivatives from 09:00 to 11:00, from 12:30 to 15:00 and from 15:30 to 18:00.
Note: The opening hours mentioned above are indicated as the local time in Tokyo, (Japan). The standard time zone for Tokyo is UTC / GMT +9 hours.
Weekend
The Tokyo Stock Exchange is open Monday through Friday and follows the following holiday schedule for the calendar year 2019:
- January 1-2;
- January 8;
- March 31;
- April 30;
- May 3-4;
- July 16;
- September 17;
- September 24th;
- October 8;
- November 23;
- December 24th;
- December, 31st.
Important stock markets and exchanges
Stock markets are financial markets that combine individual and institutional investors with enterprises in need of capital. These markets play an important role in the country's economy. Stock exchanges work with national and international regulatory authorities to ensure transparency and protect participants from dishonest trading practices.
North America | Asia | Europe | Other markets |
The leading positions in the value of traded shares are held by the New York Stock Exchange and Nasdaq. The New York Stock Exchange, as the world's largest stock market, is the preferred location for thousands of stocks and securities of US and foreign companies. The Dow Jones, S&P 500 and Nasdaq-100 industrial indexes are closely related to market indices that track baskets of stocks listed in these two major markets. These indices often serve as proxies for the US economy, which has a significant impact on other major global economies. | The next three largest stock markets by value of traded shares were the Tokyo Stock Exchange, followed by the two Chinese stock markets of Shanghai and Shenzhen. These markets reflect the growing importance of Asia in the new millennium. The Tokyo stock market has a unique position as a market that begins to trade when evening comes in New York | London and Frankfurt are home to the two largest European exchanges. London is seen as the financial capital of Europe, and Frankfurt is Germany’s largest financial center and home of the European Central Bank. The United Kingdom is one of the largest economies in Europe, and London serves as a financial intermediary between Europe and North America. Paris, Milan and Madrid are home to other important European stock exchanges | An important role in the efficient distribution of capital is played by the stock exchanges of Sao Paulo and Johannesburg, which are the largest in their regions. Information technology has also contributed to the creation of electronic communications networks that primarily allow institutional investors to trade around the clock through secure servers. |
How is Tokyo Exchange different from others?
At first glance, Japan's leading stock market works like any other. But, like so much more in Japan, what seems familiar on the surface can be very different inside. This stock market is one of the largest, most closely watched and influential in the world. But still, the exchange is largely controlled by Japanese rules, which disappoints Westerners who are trying to trade on the Tokyo Stock Exchange using standard analytical measures.
“All of the assumptions we have on the stock markets are not consistent with the Tokyo Stock Exchange,” said Peter Tasker, general manager of the British securities company Kleinwort Benson International. Despite the collapse in global stock markets, when prices at many leading exchanges fell by 30 percent, Tokyo cut prices by only 15 percent.
The hostile takeover that dominated Wall Street is unknown in Japan, where shareholder rights are considered less important than company employees.
The Tokyo market has long been dominated by exchanges in Japan. It accounts for more than 95% of all shares and share capital in the country. But last year, partly because of the rise of the Japanese yen against the dollar, and partly because of rising stock prices, the Tokyo market has become worth more than any other stock market. At the end of October, the New York Stock Exchange was capitalized at $ 2.254 trillion, and Tokyo - $ 2.677 trillion.
Investors abroad began to look more closely at the Tokyo market, and many did not like what they saw. Some economists said the market is overvalued and is moving toward a collapse. They pointed to sharp fluctuations in stock prices, inflated price-earnings ratios, and the amount of investment based on high land prices.
Some brokers believe that the market in Tokyo will resist the pressure of change, despite the fact that there is more foreign capital. Two years ago, the exchange allowed six foreign companies to become participants in the stock exchange.
“Foreigners fool themselves if they believe their presence is enough to change the fundamental nature of this market,” said Perry Gary, senior analyst at Chase Manhattan Securities. The market reflects the structure of this society.
Others argue that the Tokyo market will change with great influence on international trading practices. Many Japanese people believe that the Japanese market is not yet ripe.
Japan has been trading stocks since 1878, but only recently has the Tokyo market gone global. Interest in stock trading has increased since the Japanese have become major investors in global stock and bond markets.
Prospects
The Tokyo Stock Exchange plays an important role in the modern Japanese economy. Evolutionarily, it proceeds from the securities market: buyers and sellers needed a place to conduct operations, which became the exchange. The stock exchange is the center of the economic life of the state, ensuring the regular functioning of the organized securities market. A national stock exchange exists in every market economy country.
The Japanese exchange group has become one of the strongest securities markets in the world and is developing dynamically. The Tokyo Stock Exchange is the largest in the country, and it was at its expense that Japan entered the world market.