An Overview Of Japanese Share Market

The Bank of Japan adopted a loose monetary policy during the late 1980s. This influenced the economy in many ways. Share prices rallied till December 1989. The Japanese Share Market has gone through a lot of turbulent times since its history. Lets take a look at this and other aspects of the share market in Japan.

The Nikkei and the Topix are the two major indexes which are indicative of the Japanese Share Market. The Nikkei 225 Stock average is a price weighted index. It is one of the leading and most respected indexes in Japan and in Asia. The Nikkei is a price-weighted index. As is the case with all price-weighted indexes, the Nikki considers not just the market cap of the company, but also the movement of a stock in terms of a currency, in this case the yen.

The other major index is the Tokyo Stock Price Index or Topix for short. It represents the first 1000 largest companies listed on the exchange. It is considered to be more representative of the share market in Japan than the Nikkei.

The Japanese Share Market has witnessed a number of cyclical fluctuations since its history. In the year 1989 the Nikkei touched an all time high of 40000 points. This was party because of strong fundamentals and sentiment. The rise was accentuated on account of the policies of Japanese monetary Institutions. This resulted in an artificial economic effect which we can call as a 'Bubble Effect'. This effect was just too good to be true.

The bubble finally burst and there was a crash in the share market after 1989. The market went through a recovery period which was very slow and gradual Until the year 2004 there were very few occasions when the market gained between 35 to 50%. This was on account of very low investor confidence and overall pessimism. The fear that a downswing was just around the corner prevented a number of investors from loosening their purse-strings. The bearish phase had left an impact on the investor's psyche.

However after July 2005 the Nikkei began to show improvement. It took a slow and gradual, but steady path to reach a high of over 16000 points.

Analysts feel that this time the recovery is a durable one. In order to keep up this recovery, it is important that funds be channeled into investment.

The structure of the share market in Japan is such that foreign individual investors cannot open accounts with Japanese brokers in Japan. In case you want to invest in the Japanese Share Market, then there are brokers in the US, Singapore and Hong Kong who can assist you in the process.