Japan Exchange Group – Tokyo: Explained
BY TIO Staff
|July 29, 2024The Japan Exchange Group, often referred to as JPX, is a significant entity in the world of trading. It is the amalgamation of two of the largest commodity and financial service exchanges in Japan, namely the Tokyo Stock Exchange and the Osaka Securities Exchange. This merger has created a powerhouse in the Asian financial market, making it a crucial player in the global trading scene.
As a trader, understanding the workings of the Japan Exchange Group is essential. This glossary entry aims to provide an in-depth understanding of the JPX, its structure, operations, and its significance in the global trading market. We will delve into the history, the various indices it hosts, the trading hours, and the types of securities traded on this platform.
History of the Japan Exchange Group
The Japan Exchange Group was formed in January 2013, following the merger of the Tokyo Stock Exchange and the Osaka Securities Exchange. The merger was a strategic move aimed at consolidating operations and improving efficiency in the face of increasing competition from other global exchanges.
Both exchanges brought a rich history and a wealth of experience to the table. The Tokyo Stock Exchange, established in 1878, was the largest stock exchange in Japan, while the Osaka Securities Exchange, founded in 1878, was the birthplace of futures trading in Japan.
Pre-Merger Era
The Tokyo Stock Exchange (TSE) and the Osaka Securities Exchange (OSE) had a long and storied history before their merger. The TSE was the main hub for equity trading in Japan, hosting the majority of the country's publicly traded companies. The OSE, on the other hand, was the leading derivatives exchange in the country.
Despite their individual successes, both exchanges faced challenges in the form of increasing global competition and a changing financial landscape. These challenges eventually led to discussions about a potential merger.
Post-Merger Era
The merger of the TSE and OSE marked a significant turning point in Japan's financial history. The newly formed Japan Exchange Group became the third-largest stock exchange group in the world, after NYSE Euronext and NASDAQ OMX. The merger allowed for the consolidation of operations, resulting in improved efficiency and competitiveness.
Today, the Japan Exchange Group is a major player in the global trading scene, hosting some of the largest and most well-known companies in Japan and the world.
Indices of the Japan Exchange Group
The Japan Exchange Group hosts several indices, the most notable of which are the Nikkei 225 and the TOPIX. These indices are crucial barometers of the Japanese economy and are closely watched by traders and investors worldwide.
The Nikkei 225, also known as the Nikkei Stock Average, is a price-weighted index that tracks the performance of 225 large, publicly owned companies in Japan. The TOPIX, or the Tokyo Stock Price Index, is a market-capitalization-weighted index of all companies listed on the first section of the Tokyo Stock Exchange.
Nikkei 225
The Nikkei 225, first calculated in 1950, is one of the most widely quoted indices in Japan. It is a price-weighted index, meaning that the companies with the highest stock prices have the most influence on the index's performance. This method differs from many other indices, which are market-capitalization-weighted.
The Nikkei 225 includes a diverse range of sectors, from technology and consumer goods to financial services and utilities. This diversity makes it a reliable indicator of the overall health of the Japanese economy.
TOPIX
The TOPIX, first calculated in 1968, is another major index hosted by the Japan Exchange Group. Unlike the Nikkei 225, the TOPIX is a market-capitalization-weighted index. This means that companies with the largest market capitalizations have the most influence on the index's performance.
The TOPIX includes all companies listed on the first section of the Tokyo Stock Exchange, making it a comprehensive indicator of the Japanese stock market's performance.
Trading Hours of the Japan Exchange Group
The Japan Exchange Group operates on a schedule that is unique to the Asian market. Understanding these trading hours is crucial for traders who wish to participate in the Japanese market.
The trading day on the Japan Exchange Group is divided into two sessions: the morning session and the afternoon session. The morning session runs from 9:00 AM to 11:30 AM Japan Standard Time (JST), and the afternoon session runs from 12:30 PM to 3:00 PM JST.
Pre-Open and Post-Close Trading
Before the start of the morning session, there is a pre-open period from 8:30 AM to 9:00 AM JST. During this time, traders can place orders, but no trades are executed. This period allows traders to prepare for the opening of the market.
After the close of the afternoon session, there is a post-close period from 3:00 PM to 3:30 PM JST. During this time, traders can continue to place orders, but again, no trades are executed. This period allows traders to adjust their positions after the close of the market.
Trading Break
Between the morning and afternoon sessions, there is a trading break from 11:30 AM to 12:30 PM JST. During this time, no trading activities are allowed. This break provides traders with a chance to assess the morning's trading activities and prepare for the afternoon session.
It's important to note that these trading hours are subject to change due to public holidays and special trading days. Therefore, traders should always check the Japan Exchange Group's official website for the most up-to-date information.
Securities Traded on the Japan Exchange Group
The Japan Exchange Group hosts a wide range of securities, making it a diverse and vibrant marketplace for traders. The types of securities traded on the Japan Exchange Group include stocks, bonds, ETFs, REITs, and derivatives.
Each type of security offers unique opportunities and risks, making it important for traders to understand the specifics of each before participating in trading activities.
Stocks
Stocks represent ownership shares in a company. When you buy a company's stock, you are buying a piece of that company. Stocks are the most common type of security traded on the Japan Exchange Group.
The Japan Exchange Group hosts stocks from a wide range of sectors, including technology, manufacturing, finance, and consumer goods. This diversity offers traders a wealth of opportunities to diversify their portfolios and participate in the growth of these companies.
Bonds
Bonds are debt securities that represent a loan made by an investor to a borrower, usually a corporation or government. The borrower promises to pay back the loan with interest over a specified period. Bonds are a popular choice for conservative investors seeking steady income and capital preservation.
The Japan Exchange Group hosts a variety of bonds, including government bonds, corporate bonds, and municipal bonds. These bonds offer different levels of risk and return, allowing traders to choose the ones that best fit their investment objectives.
ETFs and REITs
Exchange-Traded Funds (ETFs) and Real Estate Investment Trusts (REITs) are types of investment funds that trade on exchanges. ETFs are funds that track an index, sector, commodity, or other asset. REITs are funds that own and manage income-producing real estate.
The Japan Exchange Group hosts a wide range of ETFs and REITs, offering traders the opportunity to invest in a diversified portfolio of assets with a single transaction. These funds are a popular choice for investors seeking diversification and passive investment strategies.
Derivatives
Derivatives are financial contracts whose value is derived from an underlying asset, such as a stock, bond, commodity, or currency. The most common types of derivatives traded on the Japan Exchange Group are futures and options.
Futures are contracts to buy or sell an asset at a specified future date and price. Options are contracts that give the holder the right, but not the obligation, to buy or sell an asset at a specified price within a certain period. Derivatives are popular tools for hedging risk and speculating on future price movements.
Conclusion
The Japan Exchange Group is a major player in the global trading scene, hosting a wide range of securities and indices. As a trader, understanding the workings of the Japan Exchange Group can provide you with valuable insights and opportunities.
Whether you're interested in trading stocks, bonds, ETFs, REITs, or derivatives, the Japan Exchange Group offers a vibrant and diverse marketplace for your trading activities. By understanding its history, indices, trading hours, and the types of securities traded, you can make more informed trading decisions and potentially enhance your trading performance.
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