The constituent stocks of the Tokyo Stock Price Index, TOPIX, are expected to be substantially narrowed under the reforms, to approximately 1,000 stocks from October onward. This will place greater emphasis than before on evaluating companies’ earnings power.
A reform to review the eligibility criteria for TOPIX is expected to narrow its current universe of more than 1,600 constituent stocks to approximately 1,000. This is expected to raise the hurdle for selecting stocks for inclusion in the index.
The reforms are expected to take effect from October, creating a situation in which the earnings power of listed companies will be examined more closely.
Market participants are closely watching the possibility that TOPIX’s new eligibility requirements could affect stock selection and the flow of funds.