The Nikkei 225 (日経平均株価 Nikkei heikin kabuka?, 日経225), more commonly called the Nikkei, the Nikkei index, or the Nikkei Stock Average (/ˈnɪkeɪ/, /ˈniːkeɪ/, or /nɪˈkeɪ/), is a stock market index for the Tokyo Stock Exchange (TSE). It has been calculated daily by the Nihon Keizai Shimbun (Nikkei) newspaper since 1950. It is a price-weighted index (the unit is yen), and the components are reviewed once a year. Currently, the Nikkei is the most widely quoted average of Japanese equities, similar to the Dow Jones Industrial Average. In fact, it was known as the "Nikkei Dow Jones Stock Average" from 1975 to 1985.
The Nikkei 225 began to be calculated on September 7, 1950, retroactively calculated back to May 16, 1949. Since January 2010 the index is updated every 15 seconds during trading sessions.
The Nikkei 225 Futures, introduced at Singapore Exchange (SGX) in 1986, the Osaka Securities Exchange (OSE) in 1988, Chicago Mercantile Exchange (CME) in 1990, is now an internationally recognized futures index.
The Nikkei average has deviated sharply from the textbook model of stock averages which grow at a steady exponential rate. The average hit its all-time high on December 29, 1989, during the peak of the Japanese asset price bubble, when it reached an intra-day high of 38,957.44 before closing at 38,915.87, having grown sixfold during the decade. Subsequently, it lost nearly all these gains, closing at 7,054.98 on March 10, 2009—81.9% below its peak twenty years earlier.
Another major index for the Tokyo Stock Exchange is the Topix.
On March 15, 2011, the second working day after the massive earthquake in the northeast part of Japan, the index dropped over 10% to finish at 8605.15, a loss of 1,015 points. The index continued to drop throughout 2011, eventually bottoming out at 8160.01 on November 25, putting it at its lowest close since March 10, 2009. The Nikkei fell over 17% in 2011, finishing the year at 8455.35, its lowest year-end closing value in nearly thirty years, when the index finished at 8016.70 in 1982.
The Nikkei started 2013 near 10,600, hitting a peak of 15,942 in May. However, shortly afterward, it plunged by almost 10% before rebounding, making it the most volatile stock market index among the developed markets. In October, 2013, the UK-based hedge fund Algorates, whose strategy is based partially on high-frequency trading, a technique most successful in markets with high volatility, announced major positions in the Nikkei 225.
After Black Monday, regulators overhauled trade-clearing protocols to bring uniformity to all prominent market products. They also developed new rules, known as circuit breakers, allowing exchanges to halt trading temporarily in instances of exceptionally large price declines. For example, under current rules, the New York Stock Exchange would temporarily halt trading when the S&P 500 stock index declines 7 percent, 13 percent, and 20 percent in order to allow investors to make informed choices when the market is highly volatile.
In 1986, the United States economy began shifting from a rapidly growing recovery to a slower growing expansion, which resulted in a "soft landing" as the economy slowed and inflation dropped. The stock market advanced significantly, with the Dow peaking in August 1987 at 2722 points, or 44% over the previous year's closing of 1895 points.
On October 14, the DJIA dropped 95.46 points (3.8%) (a then record) to 2412.70, and fell another 58 points (2.4%) the next day, down over 12% from the August 25 all-time high.
On Thursday, October 15, 1987, Iran hit the American-owned supertanker, the Sungari, with a Silkworm missile off Kuwait's main Mina Al Ahmadi oil port. The next morning, Iran hit another ship, the U.S. flagged MV Sea Isle City, with another Silkworm missile.
On Friday, October 16, when all the markets in London were unexpectedly closed due to the Great Storm of 1987, the DJIA closed down another 108.35 points (4.6%) to close at 2246.74 on record volume. American Treasury Secretary James Baker stated concerns about the falling prices.
The crash began in Far Eastern markets the morning of October 19. Later that morning, two U.S. warships shelled an Iranian oil platform in the Persian Gulf in response to Iran's Silkworm missile attack on the Sea Isle City.