Japan has introduced a new stock index called the JPX Prime 150 Index to enhance corporate governance reforms and assist investors in identifying corporate value in the equity markets. It is a curated list of the top 150 constituent listings on the Tokyo Exchange, including major tech giants like Sony Group, Hitachi, Nintendo, and Warren Buffet-backed trading houses such as Marubeni, Itochu, and Mitsui & Co. However, automakers like Toyota Motor and Nissan Motor are excluded from the index. The Japan Exchange Group’s market innovation and research director of index business, Takahiro Miura, stated that increasing the value of listed companies is crucial for the expansion and revitalization of the market. The Prime 150 index comprises approximately half of the Japan stock market and is comparable in quality to the S&P 500. Miura expects index-based products based on the JPX Prime 150 index, such as index futures and exchange-traded funds, to be available by the end of the year.
Japanese stocks have performed exceptionally well this year, with the Nikkei 225 up nearly 30% and the Topix reaching its highest point in over three decades with a gain of almost 24%. Investors are optimistic about the potential for further corporate governance reforms that promise higher returns on investment.
The Japan Exchange Group has been emphasizing capital efficiency improvement for companies starting this year. The operator of the Tokyo bourse aims to ensure sustainable growth and increased corporate value in the mid- to long-term by focusing on the cost of capital and profitability based on the balance sheet, rather than solely considering sales and profit levels on the income statement. These reforms are part of a broader, multi-year structural overhaul that originated with Abenomics, a set of economic policies launched by the late Prime Minister Shinzo Abe in the early 2010s, aiming to revive economic growth and combat long-standing deflation issues in Japan.
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