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    Tokyo Stock Exchange

    The Tokyo Stock Exchange was first opened in 1878, trading precious metals and government bonds. Stocks joined the party in the 1920s. Interrupted by World War II, the exchange reopened in May 1949, and by 1989 (right before the big crash) its total market value topped $4 trillion. Now the exchange lists nearly 2,000 firms, including some of the most successful companies in Japan.

    You can easily track the TSE by watching the Nikkei 225 Stock Average, usually referred to simply as the Nikkei (pronounced “knee-kay”), a stock index that tracks the ups and downs of the Japanese stock market. It includes 225 blue chip stocks, all headquartered in Japan. The Nikkei is similar to the S&P 500 Index in the United States, which tracks the share price activity of 500 of the largest corporations on the market . 

    Another way to gauge the Japanese market is with the TOPIX (Tokyo Stock Price Index). TOPIX, which launched in 1968, covers about 70% of the Tokyo Stock Exchange, tracking primarily large-cap stocks (stocks with market capitalization of at least $10 billion).

    Unlike most other major exchanges, the TSE has two trading sessions per day. The morning session, called “zenba,” is open from 9:00 A.M. to 11:30 A.M.; the afternoon session, called “goba,” runs from 12:30 P.M. to 3:00 P.M. Stocks listed on the TSE trade in 1,000-share blocks, and virtually all trades are executed electronically.

    Trading with ADRs

    Americans can participate in foreign stock markets in a few different ways. Among the simplest is through the use of ADRs (American Depositary Receipts). Many foreign stocks are listed as ADRs on U.S. stock exchanges (primarily NASDAQ and OTC), giving U.S. citizens a quick and easy way to add foreign holdings to their portfolios.

    The TSE has a tumultuous history. In 1980, the Nikkei was plodding along at 6536, but then Japanese stocks soared. By December of 1989, the index had quintupled to 38916. But in the 1990s, fortune ran the other way, and the Nikkei (along with the TOPIX) took a nosedive. In March 2003, the index plunged below 8000, and continued to follow a rollercoaster-like path over the next decade. 

    In the first half of 2016, the Nikkei bounced around between 15000 and 17000. To limit market volatility, the TSE halts major declines through circuit breaker rules, similar to those used on the NYSE.

    Companies listed on the TSE include big names like Honda, Toyota, and Kikkoman.

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