Nikkei 225 to Exclude Citizen Watch in Periodic Review, Emphasizing Volatility Index as Primary Benchmark

Nikkei 225 Index Undergoes Significant Revisions: Shift In, Citizen Watch out

September 8, 2025

Tokyo – The Nikkei 225, Japan’s leading stock market indicator and a benchmark for Asian equities, is set for a reshuffle, effective October 1st. The changes, announced Monday, aim to refine sector representation and reflect market dynamics.

Software Firm Shift Joins the Elite Index

Software testing company Shift will be incorporated into the nikkei 225, taking the place of watchmaker Citizen Watch. This strategic adjustment is designed to maintain a balanced sector composition within the influential index.

BayCurrent’s Weighting Adjusted

Alongside the inclusion of Shift, the Nikkei has revised the price-adjustment factor for BayCurrent, a current constituent. This factor will increase from 0.5 to 1.0, acknowledging improvements in the company’s liquidity since its inclusion in the spring review. Initial concerns around liquidity prompted the lower weighting during its prior inclusion.

Sony Financial Group’s Temporary Inclusion

In a first-time submission of updated index rules, Sony Financial Group will be temporarily added to the Nikkei 225 on September 29th, coinciding with its listing following a spinoff from Sony Group. The company will be removed from the index the following day. Updated index rules approved in July paved the way for this unique inclusion process.

Ripple Affect on Related Indexes

The removal of Citizen Watch extends beyond the Nikkei 225.The company will also be dropped from the Nikkei 225 Climate Change 1.5°C Target Index and the Nikkei 225 High Dividend Yield Stock 50 Index, beginning October 1st. Replacements for these related indexes will not be implemented until their regularly scheduled reviews.

Price-Adjustment Factors revised for Three Constituents

Moreover, Nikkei announced adjustments to price-adjustment factors for Nippon Steel, IHI, and Nitori Holdings, effective September 29th. Nippon Steel’s factor will increase from 0.1 to 0.5, IHI’s will move from 0.1 to 0.7, and Nitori Holdings’ will rise from 0.5 to 2.5. these adjustments are in response to upcoming stock splits for each company.

Did You Know? The Nikkei 225 represents the average of 225 top-performing publicly owned companies in Japan.
pro Tip: Investors shoudl closely monitor these index changes as they can significantly impact the performance of related exchange-traded funds (ETFs) and investment portfolios.

What impact do you think these changes will have on the Japanese stock market? And how can individual investors best prepare for these shifts?

Understanding the Nikkei 225

The Nikkei 225 isn’t just a number; it’s a vital barometer of the Japanese economy and a key indicator for global investors. Since its inception in 1950, the index has evolved to reflect the changing landscape of Japanese businesses.Its composition is regularly reviewed to ensure it accurately represents the most prominent and actively traded companies.

According to data from the Japan Exchange Group, the Nikkei 225 has seen an average annual return of approximately 8% over the past 50 years, although past performance is not indicative of future results. The index is especially sensitive to global economic trends, currency fluctuations, and shifts in government policy.

Company	Old Factor	New Factor
Nippon Steel	0.1	0.5
IHI	0.1	0.7
nitori Holdings	0.5	2.5

Frequently Asked Questions About the Nikkei 225

• What is the Nikkei 225 index? The Nikkei 225 is a stock market index representing 225 top publicly owned companies in Japan.
• Why are companies added or removed from the Nikkei 225? Companies are adjusted to maintain sector balance and reflect current market conditions.
• What does a price-adjustment factor mean? A price-adjustment factor modifies a stock’s weighting in the index due to factors like liquidity or stock splits.
• How do index changes impact investors? Changes can affect the performance of ETFs and investment portfolios tied to the Nikkei 225.
• What is the meaning of Sony Financial Group’s temporary inclusion? It demonstrates the application of new rules for handling spinoffs, ensuring a smooth transition for newly listed companies.
• What are the Nikkei 225 Climate Change and High Dividend Yield indexes? These are related indexes focusing on specific investment themes, and changes in the Nikkei 225 can impact their composition.

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What potential implications does the increased focus on the JVX have for companies with high beta values within the Nikkei 225?

Nikkei 225 to Exclude citizen Watch, Shifts Focus to Volatility as Key Indicator

Citizen Watch’s departure from the Nikkei 225

In a significant shift for the Japanese stock market, Citizen Watch is set to be excluded from the nikkei 225 index following the latest periodic review. This decision, finalized on September 8, 2025, reflects a broader trend towards prioritizing companies demonstrating robust growth and stability, alongside increased emphasis on market volatility. The Nikkei 225, comprised of the 225 top publicly listed companies in Japan, serves as a crucial barometer of the overall Japanese equity market’s health.

The removal of Citizen Watch isn’t necessarily indicative of the company’s poor performance, but rather a recalibration of the index’s composition to better reflect current market dynamics. Factors contributing to this decision likely include relative underperformance compared to peers within the index, and a perceived shift in investor focus towards sectors exhibiting higher growth potential.This change impacts Japanese stock market investors and those tracking the Nikkei index.

The Rising Importance of the Volatility Index

The Nikkei 225’s review process is increasingly factoring in the japan volatility index (JVX) as a primary benchmark. This signals a growing awareness of risk management and the need to accurately gauge market sentiment. The JVX, mirroring the VIX (Volatility index) for the S&P 500, measures market expectations of near-term volatility conveyed by option pricing.

Here’s how the increased focus on volatility impacts the Nikkei 225:

Dynamic Rebalancing: The index is becoming more responsive to fluctuations in market risk, leading to more frequent and possibly larger rebalancing adjustments.

Sector Rotation: Increased volatility often triggers sector rotation,with investors shifting towards defensive stocks during periods of uncertainty. this can influence which companies remain in the Nikkei 225.

Investor Sentiment: The JVX provides a real-time gauge of investor fear and greed,influencing trading strategies and asset allocation decisions.

Risk Assessment: The index’s weighting now considers a company’s sensitivity to volatility, favoring those that demonstrate resilience during market downturns.

Implications for Investors & Market participants

The exclusion of Citizen Watch and the emphasis on volatility have several implications for investors:

Portfolio Adjustments: Investors holding index funds or ETFs tracking the Nikkei 225 will see their portfolios automatically adjusted to reflect the change. This means selling Citizen Watch shares and reallocating capital to the replacement company.

Trading Opportunities: The rebalancing event can create short-term trading opportunities as market participants react to the news.

Increased Scrutiny of Volatility: Investors shoudl pay closer attention to the JVX as an indicator of potential market movements. Understanding Nikkei 225 constituents and their volatility profiles is now more critical.

sector Analysis: A deeper dive into sector performance and risk factors is essential for informed investment decisions. Sectors like technology and healthcare, often considered growth drivers, may benefit from the shift.

Understanding the Nikkei 225 Review Process

The Nikkei 225 is reviewed semi-annually, in June and December. The review considers several factors, including:

1. Market Capitalization: A company’s total market value.
2. Trading Volume: The number of shares traded daily.
3. Financial Performance: Revenue, profits, and other key financial metrics.
4. Volatility: A measure of price fluctuations.
5. Sector Representation: Ensuring adequate representation of different industries.

The review committee, overseen by Nikkei Inc., makes the final decisions regarding index composition. The goal is to maintain the Nikkei 225 as a representative and reliable indicator of the Japanese stock market. Nikkei Inc. plays a vital role in maintaining the index’s integrity.

Historical Context: Previous Nikkei 225 Changes

The Nikkei 225 has undergone numerous changes throughout its history. In 2022,several companies were added and removed,reflecting the evolving economic landscape. For example, Recruit Holdings was added, while Hitachi Chemical was removed. These changes demonstrate the index’s dynamic nature and its ability to adapt to changing market conditions.Analyzing these past adjustments provides valuable insights into the review committee’s priorities and potential future trends.Tracking Nikkei 225 historical data can help predict future changes.

Benefits of a Volatility-Focused Index

Prioritizing volatility in the Nikkei 225 offers several benefits:

Improved Risk Management: A volatility-aware index provides a more accurate assessment of market risk.

Enhanced Portfolio Diversification: Encourages investors to diversify their portfolios across different asset classes and sectors.

Greater Market efficiency: Promotes more informed trading decisions and efficient capital allocation.

Increased Clarity: The JVX provides a transparent and readily available measure of market sentiment.

Practical Tips for Navigating the Changes

*Monitor the JV