If you’ve ever tried comparing the Nikkei Share Index with other global benchmarks like the Dow Jones Industrial Average or the FTSE 100, you’ll quickly realize it’s not just about which companies are listed or where the exchanges are based. The real distinctions go deeper—into methodology, calculation quirks, sector representation, and the unique quirks of the Japanese economy. In this piece, I’ll share insights drawn from years of following these indices, referencing regulatory documents (like the official Nikkei 225 methodology and Dow Jones rules), and even a few mishaps I’ve had trying to track their performance for clients. Plus, I’ve included a comparison table on global "verified trade" standards, since those economic backdrops often shape index composition and investor expectations.
A few years ago, I was helping a friend track Japanese stocks for his cross-border investment portfolio. He excitedly pointed out that the Nikkei 225 looked “just like the Dow.” At first glance, it seemed true: both are price-weighted, both are “225” or “30” blue-chip lists, both are quoted everywhere. But when we tried to compare their actual returns, things got weird. The Nikkei’s swings were much bigger, and sometimes didn’t match up with Japan’s economic news at all.
That’s when I realized: the Nikkei isn’t simply a Japanese version of the Dow or FTSE. It is its own beast, thanks to some fascinating (and at times, frustrating) quirks in how it’s built and maintained.
The Nikkei 225 is, like the Dow, price-weighted. This means that stocks with a higher price per share get a bigger impact on the index movement, regardless of the company’s actual size or market value. By contrast, the FTSE 100 is capitalization-weighted, meaning the largest companies by market value dominate the index. (The S&P 500, by the way, is also cap-weighted.)
Why does this matter? Here’s a quick story: back in 2021, Fast Retailing, which owns Uniqlo, had a share price surge. Because its stock price was so high, it single-handedly accounted for over 10% of the Nikkei’s movement on some days—even though it wasn’t the biggest company by value. If you tried to replicate this effect in the FTSE 100, you’d fail: no single stock can dominate unless it truly is the biggest by total value.
To see this in action, I once ran a test using real data from Yahoo Finance. I plotted the daily percentage change of the Nikkei 225 and compared it to the Topix (which is cap-weighted) and the Dow:
If you want to try this yourself, download CSV data for each index from Yahoo Finance, plot the daily changes, and color-code by sector. You’ll spot the difference—trust me.
The Nikkei 225 is not Japan’s largest 225 companies. Instead, it’s a curated list of “representative” stocks across sectors, picked by the Nihon Keizai Shimbun newspaper. Some heavyweights, like Toyota, have relatively low index influence because their share price is modest. By contrast, the FTSE 100 and S&P 500 are strictly rules-based: the largest companies by market capitalization make the cut.
This sometimes leads to odd outcomes. For example, the Nikkei has been criticized for overweighting certain stocks while under-representing entire sectors. It’s a bit like choosing a soccer team not by picking the best players, but the ones with the flashiest shoes.
Japan’s economy is unique, so is its index. The Nikkei 225 is heavy on electronics, autos, and a smattering of retail and financials. The FTSE 100, on the other hand, is dominated by energy, mining, and banking giants. The Dow, with its quirky selection, sometimes leaves out entire hot sectors (like tech, until recently).
The bottom line: if you’re betting on a country’s future, the Nikkei might not actually track the average Japanese company’s fortunes—especially compared to the broader, cap-weighted Topix.
The Nikkei is reviewed annually, but only a few stocks are swapped out each year. The Dow is also slow to change, while the FTSE 100 is reviewed quarterly. This affects how quickly each index adapts to economic shifts or emerging industries.
For example, it took years for tech startups to penetrate the Nikkei and Dow, whereas the FTSE (and S&P 500) updated more dynamically.
The Nikkei 225 is managed by a newspaper, not an exchange or a financial data firm. The Dow is run by S&P Dow Jones Indices, while the FTSE 100 is managed by FTSE Russell (a subsidiary of the London Stock Exchange Group). Each has its own methodology, governance, and oversight, which directly impacts transparency and investor confidence. For a deep dive, check official documentation from:
Since many investors use indices as proxies for national economic health—and since trade regulations impact index constituents—I’ve compiled a table comparing how different countries (and their indices) handle "verified trade" definitions and enforcement.
| Country/Region | Standard Name | Legal Basis | Enforcement Agency |
|---|---|---|---|
| Japan | Customs Act (Article 69-14) | Japanese Customs Law | Japan Customs |
| United States | Verified Exporter Program | US CBP Regulations | US Customs and Border Protection (CBP) |
| United Kingdom | Authorised Economic Operator (AEO) | UK HMRC Guidelines | HM Revenue & Customs |
| EU | Union Customs Code | EU Customs Code | European Commission |
Note: These standards affect cross-border trade reporting, which can indirectly shape which companies dominate their respective indices, especially exporters.
Let’s say Company A in Japan wants to get its goods into the UK post-Brexit. They hit a snag: the UK’s AEO status has different requirements from Japan’s customs certification. There’s confusion over the paperwork; Japanese regulators insist their system is WTO-compliant, but the UK’s HMRC demands additional documentation. This back-and-forth delays shipments, causes reporting headaches, and affects the earnings of several Nikkei-listed exporters. I’ve seen this happen with automotive parts suppliers—sometimes, the issue gets escalated, and the WTO or local embassies have to step in.
An industry expert, Mr. Sato, once told me at a Tokyo conference: “It’s not just about tariffs. If your verification process doesn’t line up, your goods get stuck, your company gets penalized, and suddenly your stock tanks. That’s why the Nikkei sometimes swings on news that barely moves the FTSE.”
The Nikkei’s quirks—especially its price-weighted structure, hand-picked constituents, and unique sector mix—make it behave differently from the Dow, FTSE 100, or S&P 500. If you’re using it as a proxy for “Japan Inc.,” be cautious: the index may move dramatically based on a handful of high-priced stocks, not the broader economy.
And if you’re following trade policy or regulatory changes, remember that each country’s compliance rules affect which companies thrive and get represented in these indices. A policy hiccup in verified trade can ripple into index performance, especially for export-heavy economies like Japan.
Honestly, after years of tracking these indices for clients, I’ve learned: never assume one country’s main index represents the whole economy. The Nikkei is a great window into Japan’s market psyche—but it pays to know what’s behind the glass.