1) Introduction
Tokyo Stock Exchange is established as the central stock market of Japan in terms of number of listed companies, trading volume and market liquidity. Its aggregated market value is the 6th largest in the world and the third in Asia.
2) Market Activity
The TSE cash equity market open to all investors is currently made up of four segments – First Section, Second Section, Mothers, and JASDAQ. The First Section is comprised of about 2,200 of the most liquid companies, and about 3,800 companies altogether.
TSE’s aggregated market value of USD 6.71 trillion as of 2020 is the 6th largest in the world, next to New York Stock Exchange, NASDAQ, Shanghai Stock Exchange, Euronext and Hong Kong Exchange and Clearing.
Its stock trading value of USD 6.15 trillion, which is an indication of market liquidity, is the fifth largest in the world.
And to enhance its attractiveness as a marketplace, TSE has constantly increased its product line-up including its varieties of Exchange Traded Funds, Exchange Traded Notes, and Real Estate Investment Trusts.
Not only domestic traders, but market participants all over the world including institutional investors, funds, individual investors, and others are taking part in the TSE markets. In 2020, overseas investors made up about 65% of all trading volume.
3) Market Restructuring
TSE’s mission is to contribute to the realization of an affluent society, partially through improved convenience for market participants and all other stakeholders.
One of our biggest challenges at the moment is restructuring the market, currently made up of four divisions, into three new segments starting April 4, 2022, to incentivize listed companies to improve their corporate value over the medium to long term and thereby achieve even higher levels of support from diverse investors around the world.
The new market segments are “Prime”, “Standard“ and “Growth”.
The Prime Market is for companies which have large market capitalization (liquidity) enough to be investment instruments for many institutional investors, keep a higher quality of corporate governance, and commit to sustainable growth and improvement of medium- to long-term corporate value, putting constructive dialogue with investors at the center.
The Standard Market is for companies which have appropriate levels of market capitalization (liquidity) to be investment instruments in the open market, keep the basic level of corporate governance expected of listed companies, and commit to sustainable growth and improvement of medium- to long-term corporate value.
And the Growth Market is for companies which have a certain level of market value by disclosing business plans for realizing high growth potential and their progress towards these appropriately and in a timely manner, but at the same time pose a relatively high investment risk from the perspective of business track record.
Along with the market restructuring, TSE will revise the Tokyo Stock Price Index (TOPIX), which is currently comprised of all the domestic common stocks listed on the TSE First Section. With the new constituent selection, TSE is cutting TOPIX loose from market segments and aims to further improve its functionality as an investable index in addition to its representation of the market.
The revisions will be carried out in stages from October 2022 to January 2025, taking into account the large amounts of capital in TOPIX-based passive funds and the impact on the market.
4) The History of TSE and its New Era as a Comprehensive Exchange
The history of TSE goes back to 1878. It was established soon after the Meiji Restoration, a political event that practically restored imperial rule to Japan in 1868 under Emperor Meiji, by the Japanese so-called “father of capitalism” Eiichi Shibusawa and his allies. In the same year, Tomoatsu Godai established Osaka Stock Exchange (OSE) in a commercial city in western Japan. Both TSE and OSE have contributed to driving sustainable growth in the Japanese economy.
Later, in 2013, Japan Exchange Group (JPX) was formed through a merger between TSE and OSE. After the merger, TSE focused on cash equity stock trading and OSE on financial derivatives trading.
In 2019, JPX acquired Tokyo Commodity Exchange (TOCOM), a commodity futures exchange, and made it a 100% subsidiary. Through this acquisition, JPX became a comprehensive exchange which offers cash equity, financial derivatives, and commodity derivatives trading.
Under rapid innovation and global dynamics, JPX aims to evolve into a “total smart exchange”, where anyone can trade any products in a secure and easy way. JPX will also make a more active contribution to building a sustainable society.
5) Contributing to the SDGs
It is JPX’s corporate philosophy to contribute to the realization of an affluent society through sustainable market development, and by extension, contribute to the future envisioned in the Sustainable Development Goals (SDGs).
JPX as a whole works to promote and to support ESG investment; for example, TSE calculates ESG indices, lists ESG-related ETFs, and has set up an infrastructure fund market and an information disclosure platform for green and social bonds. And of course, JPX is endeavoring to enhance its own ESG disclosures.
Moreover, to combat climate change, JPX has pledged to switch 100% of electricity consumed by the Group to renewable energy by FY2024 and aim for carbon neutrality across Group companies on the same timeline.
