Nikkei 225 Index (NI225) – Price Forecast & Outlook

The Nikkei 225 index, more commonly named just the Nikkei, is a Japanese stock market index comprising the 225 largest companies listed on the Tokyo Stock Exchange (TSE/ TYO). The index, which operates in the Japanese yen, is used as a primary barometer of Japanese economic health and offers investors a snapshot of the performance of one of the world’s largest economies.  

Nikkei 225 Price & Chart 

The Nikkei 225 is price-weighted, meaning companies with higher share prices have a greater influence on the index. As such, it is a crucial benchmark for Japanese equities, widely used by investors and analysts to gauge market trends and performance. The index was founded in September 1950.

After experiencing its biggest daily loss since 1987 on August 5 this year, as fears about a strengthening Japanese yen and US economic slowdown hit global markets, the index has redounded. Up until that point, the Nikkei had been performing well, and despite the pullback, the Nikkei has since rallied, and is up 17.40% (end Oct, 2024) on a year-to-date basis.

Nikkei 225 Price Forecast

As a barometer of Japanese economic health, the Nikkei 225 is closely watched for indications of the country’s economic trajectory. As such, analyst sentiment towards the index can be divided into bullish and bearish camps.

The Bull Argument: Many analysts remain optimistic about the Nikkei 225, citing the potential for increased corporate earnings as key drivers. The country’s technological prowess and its large manufacturing base are also seen as supportive factors. In a February note to clients, analysts at Charles Schwab said they believed Japan’s stock market may continue to surprise investors. “However, the uniqueness of Japan’s economy and businesses also pose risks,” they wrote. In a more recent note, Bank of America highlighted the spike in the Nikkei 225 volatility index on August 5 as potentially marking the market bottom. The bank revised its year-end 2024 forecast for the Nikkei 225 back to 40,500 from 43,500.

The Bear Argument:Despite the bullish outlook, challenges persist. Concerns over global economic slowdown, rising interest rates, and the strength of the yen against the US dollar have impacted the Japanese market. Additionally, the index’s price-weighted methodology means it is susceptible to fluctuations in the share prices of a few large companies, potentially increasing volatility.

Who Should Buy the Nikkei 225

The Nikkei 225 offers exposure to Japan’s largest and most influential companies, providing a concentrated view of the Japanese economy. This makes it a suitable investment for specific investor profiles.

Japan-focused investors: Those seeking direct exposure to the Japanese market will find the Nikkei 225 a core holding. It provides a benchmark for assessing the performance of Japanese equities.

Long-term growth investors: Japan has a history of innovation and export-driven growth. Investors with a long-term perspective may see the Nikkei 225 as a potential avenue for capital appreciation.

Tech Investors: The Nikkei is heavily weighted in the technology sector. As a result, investors interested in gaining exposure to the Japanese tech market may find the index attractive. 

Currency exposure: Investors seeking exposure to the Japanese yen can benefit from investing in the Nikkei 225. However, currency fluctuations can impact overall returns.   

High-risk tolerance: Investing in the Nikkei 225 involves market risk. Investors with a higher risk tolerance may be suitable for this investment.

Trading The Index

Nikkei 225 Top 10 Companies

The index’s composition is reviewed every September, with any changes taking place in October.