Investing in the JPN225: What to Consider
Similar to most indices, the JPN225 is a type of indicator of the current state of the Japanese economy. The JPN225 index is a collection of large companies, and betting on the index is akin to betting on the local economy itself.
It is important to mention that tracking indices requires tracking market updates regularly and understanding the correlation between major political and financial events, and the value of the index. That being said, traders should consider the JPN225 index as a viable option.
WHO SHOULD INCLUDE THE JPN225 IN THEIR PORTFOLIO?
Traders in search of opportunities should not ignore indices located east of Europe. While focus is often drawn to their western counterparts, the indices located in Japan and China are arguably just as important and play a crucial role in the world economy. The JPN225 index can offer traders plenty of potential opportunities due to its sheer size and daily trading volume. In fact, this index can become a focal point of any trader’s portfolio.
Day traders: The JPN225, like all other indices, is often an important part of a day trader’s portfolio. Many traders believe that indices should not be overlooked and should be given the same consideration as currencies and commodities.
Trend trackers: Indices are often a snapshot of an economy’s current state. Indices are usually a combination of some of the largest and most liquid companies in a country. Index movement is sometimes a clear indicator of an approaching trend.
Index enthusiasts: Anyone who is looking to invest in indices, can start with the JPN225. Almost all modern economies have one or more indices, and traders can diversify by investing in multiple indices from a wide variety of markets.
WHAT DRIVES THE JPN225’S VALUE?
Like most indices, the JPN225 is susceptible to several influences. Luckily, they can be tracked, and savvy traders can even take advantage of these influences for their own gain. Some of these major influences include:
Unemployment Rate: A major indicator of the overall strength of the Japanese economy, the Unemployment Rate is a monthly report released by the Japanese government.
BoJ Monetary Policy Meeting Minutes: This report is true for Japan and every other country in the world. Central Bank policy can have a serious impact on the strength and weakness of a country’s economy, that in turn can have significant ramifications on indices – both positive and negative.
Balance of Trade: A key economic indicator that compares the total amount of goods and services exported to the total amount imported. This report is released in Japan every month.
JPN225 INDEX: A BRIEF EXPLANATION
The JPN225, known primarily as the Nikkei, is a Japanese stock index of the country’s 225 largest publicly traded companies. It was founded in 1950 and is a price-weighted index. This means that each company makes up a fraction of the index according to its price per share. The JPN225 is listed on the Tokyo Stock Exchange. It is important to note that the index is updated every 15 seconds.
HISTORY OF THE JPN225
The JPN225 has a long and rich history since its creation. Some positives, but also negatives, are still fresh in the minds of many traders. Here is a quick review of those major events that took place.
The Roaring 1980s
Japan experienced a significant financial boom in the early 80s. The economy was so good, that many investment experts seriously entertained the possibility that Japan could overtake the United States economy in the future. The index reached almost 40,000 points in 1989.
The Comeback 2017
Near the end of 2017, the JPN225 reached an almost 20-year high. This was partly due to a strong economic outlook for the Japanese economy. Despite this positive trend, the index was still only half of its peak in the late 80s.
Japan experienced a major asset bubble that began to form in the mid-1980s. As with most bubbles, it burst, causing a major financial catastrophe that resulted in a fall of 33% of the JPN225’s value. The index has never reached those highs again, despite the economy enjoying relative success since.
CONCLUSION: A BUMPY ROAD AHEAD
Companies listed on the JPN225 cannot escape the challenges faced by the Japanese economy. Indeed, for the country to thrive, many people believe that economic reform is warranted, and the government will have to find new and innovative methods of solving the country’s social predicaments. Japan has one of the oldest populations in the world. This causes labour shortages that are compounded due to the lack of desire to increase immigration. There is no way to determine how the government will solve these pressing issues. The only certainty is that something must be done, if the country is going to return to its previous financial prosperity.
*This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation.
*Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.