This article compares the differences in the inclusion methodologies and design philosophies of four Japanese equity indices, using the example of semiconductor major Kioxia Holdings, whose share price temporarily rose to more than 60 times its level after listing in December 2024. It explains the characteristics of each index and how they have incorporated the company since its listing.
Semiconductor manufacturer Kioxia Holdings listed in December 2024. As of the time of publication, its share price had temporarily risen to more than 60 times its level, and there was a point when it became Japan's largest company by market capitalization. This article examines how the four Japanese equity indices have incorporated this rapid growth.
The four indices are TOPIX, the Nikkei 225, the Yomiuri 333 Index, and the JPX-Nikkei Index 400. Each has a different design philosophy, ranging from broad-market coverage to selecting high-quality companies. TOPIX covers a broad range of stocks, while the Nikkei 225 has a price-weighted structure that is more affected by high-priced stocks. The Yomiuri 333 holds 333 stocks on an equal-weight basis, and the JPX-Nikkei Index 400 selects approximately 400 companies based on metrics including ROE.
Kioxia's inclusion differs according to the design philosophy of each index. After its listing, TOPIX included the company relatively quickly. The JPX-Nikkei Index 400 has not yet included it because only a short time has passed since the listing. The Yomiuri 333 included it from March 2025, at approximately 0.5%, while the Nikkei 225 included it in April 2026, giving it the highest weighting at 2.3%.
The advantage of index investing is that constituent stocks are replaced automatically, allowing the indices to continue incorporating new growth companies. The Yomiuri 333 may demonstrate the benefit of including stocks after their prices have risen, although investors should be mindful of trading costs from rebalancing and the index's short track record.
Over the past five years, the Nikkei 225 delivered the highest return at +163%, followed by TOPIX at +129%, the Yomiuri 333 at +not available, and the JPX-Nikkei Index 400 at +130%. The Nikkei 225 outperformed in terms of risk and the Sharpe ratio, while the other indices showed more stable performance. Over the most recent one-year period, the Nikkei 225 delivered a particularly strong return, although the other indices also maintained a certain level of performance.
A comparison of representative funds available through NISA shows that many TOPIX-tracking funds have relatively low trust fees, while funds tracking the Yomiuri 333 have relatively small net assets and remain in a growth phase. Funds tracking the JPX-Nikkei Index 400 are priced at somewhat higher levels.
In conclusion, Japanese equity indices automatically incorporate companies that are growing, and the overall assessment is that holding TOPIX as a core position is reasonable.