Nikkei Stock AverageIndex Guidebook

Nikkei Inc.

・ This document is the index guidebook of the Nikkei Stock Average calculated andpublished by Nikkei Inc (Nikkei). The document is drawn up by Nikkei and it
would be changed or modified corresponding to the revision of the index
calculation rule etc.
・ Copyright of this document is owned by Nikkei, and any copies, reprints andreproduction of this document are prohibited without the prior approval of Nikkei.
This document is prepared solely for the understanding of the index that Nikkei
calculates and publishes, and it is not to be construed as a solicitation or an offer
to buy or sell any securities or related financial instruments.
・ This English document is a translation of the original document dated July 12,2023 in Japanese and may not be an entirely accurate translation of the original
Japanese document. In any case where differences arise between the English
version and the original Japanese version, the original Japanese document will
prevail.

(October 2, 2023 creation)

GB-101-E-20231002

1: Summary(1) Introduction
The Nikkei Stock Average (Nikkei 225) is used around the globe as the most popularbenchmark of the Japanese stock market. It is comprised of 225 stocks listed on theTokyo Stock Exchange Prime Market and calculated as an adjusted price weight index.
The 225 constituent stocks are reviewed periodically by the liquidity in the market
and sector balance. By calculating with highly liquid stocks, the index is aimed atfulfilling two objectives, one is to maintain its long -term continuity and the other isto reflect the changes in the industry structure.
The index started on September 7, 1950. It was retroactively calculated back to May
16, 1949 which is the day the Tokyo Stock Exchange reopened for the first time after
the Second World War. The index has been calculated and published by Nikkei since1970, succeeding it from the Tokyo Stock Exchange.
(2) Name(Japanese)
Official:
Abbreviation:

日 経 平 均 株 価 （ Nikkei Heikin Kabuka）
日 経 平 均 （ Nikkei Heikin） , 日 経 225（ Nikkei 225）

(English)
Official:
Abbreviation:

Nikkei Stock Average
Nikkei Average, Nikkei 225

2: Constituents Management
In principle, constituents of the Nikkei 225 are reshuffled based on the following rules.
There are two types of changes in the constituents. One is “Periodic Review”
conducted twice a year, and the other is “Extraordinary Replacement” where thevacancies of the constituents created by delisting or other reasons are filled.
This section is a summary of the constituents management and the o fficial text isfound in the “Nikkei Stock Average Constituents Selection Rules” attached hereto,which supersedes the explanation below.
(1) Necessary Conditions of the constituents
Stocks (old share, domestic) listed on the Tokyo Stock Exchange Prime Market.
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However, non-ordinary shares such as ETFs, REITs, preferred stocks, preferred
securities or tracking stocks are excluded.
(2) Periodic Review
Constituents are reviewed twice a year with a base date at the end of January and July,and the result becomes effective in the beginning of April and October respectively.
Deletions and additions are announced before the effective date with some notification
period. The purpose of this review is to maintain the market representativeness ofthe constituents. Stocks with high market liquidity are added and those with low
liquidity are deleted. At the same time, to take changes in the industry structure into
account, the balance of the sectors, in terms of the number of constituents, isconsidered.
(Procedure of the review)①Assessment of liquidity
Liquidity of a stock is assessed by the two measures, “trading value” and “magnitudeof price fluctuation by trading value” which is calculated as (High price/Low price) /Trading value.
②Deletion and Addition due to liquidity
Among stocks on the Tokyo Stock Exchange Prime Market, top 450 stocks in terms of
the liquidity assessed in ① above are selected to form the “high liquidity group”.
Those constituents not in the high liquidity group are deleted. Those non -constituent
stocks which are in the top 75 of the high liquidity group are added.
③Deletion and addition by the sector balance
Nikkei has an industry classification system where there are 36 industries. For index
operation purposes, these 36 industries are re -classified into 6 sectors. They are“Technology”, “Financials”, “Consumer Goods”, “Materials”, “Capital Goods/Others”,
and “Transportation and Utilities”.
Constituents are deleted and added to balance the number of constituents among these
sectors. By considering the result of the procedure ② above, the sector balance is
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3

adjusted to make the total number of the constituents to be 225.

More specifically,i) Among the 450 stocks, half number of those that belong to a sector is designatedas the “Appropriate number of stocks” for such a sector.
ii) Compare the actual number of constituents in the sector with its “Appropriate
number”. If the actual is larger, then delete from such sector. If the actual issmaller, then add to such sector. Stocks to be deleted are selected from stocks withthe lower liquidity and stocks to be added are selected from stocks with the higher
liquidity.
④Final decision
Stocks selected by the procedures above are “Candidates” for addition and deletion.
They are presented to the committee comprised of academics and market professionals.
Based on the comments from the committee, Nikkei Inc. will finally determine andannounce the changes.
(3) Extraordinary Replacement①Reasons for deletion
Stocks which meet the following criteria are deleted from the index.
i) Designated as a “Securities to be Delisted” or “Securities on Alert”ii) Delisted due to corporate restructuring such as merger, share exchange or sharetransferiii) Transfer to the market other than the Prime
A constituent designated as “a Security under Supervision” remains to be a constituent
at the time of designation. However, Nikkei may replace such a constituent with a
pre-announcement when it is highly inappropriate to keep the stock as a constituent,e.g. probability of delisting is extremely high.
②Rules to choose stocks to be added (principal rules)
When a constituent is deleted because of the reasons above, a stock to be added will
be selected, in principle, from the same sector in the “high liquidity group” in theorder of liquidity and non-constituents.

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③Rules to choose stocks to be added (exceptional rules)
Notwithstanding ② above, following rules may apply when a deletion is known inadvance.
i) When such deletion is scheduled close to the time of the Periodic Review,
additional stocks may be selected in a part of the periodic review process.
ii) When multiple deletions are scheduled in a short period, additions may not be
selected one by one using the rules above but using the Periodic Review procedureby assessing the liquidity and the balance of the sectors.
④Rules to choose stocks to be added (exception for individual stock)Notwithstanding ② above, procedures as exemplified below may be applied in caseof corporate restructuring.

Application of this procedure is determined for each case.

i) Under the following cases, a stock of a company which will succeed the substanceof the delisting company will be added in principle, where such company is listed
or will be listed within a short period on the Tokyo Stock Exchange Prime Market.
- Stock of a surviving company in mergers (constituent is merged by non constituent)- Stock of a newly established company by stock exchange or transfer (shares of aconstituent are exchanged with those of the new company, i.e. its parent company)ii) When a company is split, and multiple companies maintain listing on the Tokyo
Stock Exchange Prime Market, a stock of a company which succeeds the major
operation will become a constituent.
⑤Effective dates of constituent changes
In principle, for each reason under (3)① , constituents are deleted and added as follows.
The exact date is announced for each event.
i) Designated as a “Security to be Delisted” or “Securities on Alert”: five businessdays after the designation.
ii) Delisted due to corporate restructuring such as merger, share exchange or sharetransfer and iii) Transfer to the market other than the Prime: effective date of the event.
However, in case that a constituent stock is delisted due to a corporate restructuring
and a stock of a company which succeeds the substance of the delisting company is
Copyright 2023 © Nikkei Inc. All rights reserved.

5added, the newly listed stock will replace on the date of its listing in principle.
In case that a constituent designated as a stock under supervision is deemed as highly
inappropriate and will be deleted, the announcement will be made approximately two
weeks before its effective dat e. Even if such a constituent is designated as a stock
to be delisted before the pre-announced effective date, the pre-announced effective
date survives.
(4) Notes on the constituents management①About Periodic Reviewi) Results of the Periodic Review are applied on the first trading day of April andOctober in principle. However, when there are delistings or new listings of thesucceeding companies under the corporate restructuring and the constituents must
be changed close to this date, changes to the index may be made in accordance withthe schedule of delistings / new listings.
ii) The maximum number of the constituents changed is 3. However, constituent
change due to corporate reorganization near the time of periodic review is notincluded in the limit of 3.
②About Extraordinary Replacement
Extraordinary Replacement is intended to fill the vacancy made by deletion due to a
specific event. There is no case to use this procedure to add a new constituent (anddelete current constituent).
③General matters
For both Periodic Review and Extraordinary Replacement, deletion and addition are
made effective on the same day to keep the number of constituents at 225. However,when necessary, the index may be calculated with less than 225 constituents. Divisor
is adjusted at times when constituents are deleted or added to maintain the continuityof the index.

3: Calculation method
The Nikkei 225 is calculated as a weighted price average where the sum of the
Copyright 2023 © Nikkei Inc. All rights reserved.

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constituent stock prices adjusted by the price adjustment factor is divided by thedivisor.
Adjusted stock price = stock price x price adjustment factor (*)
Nikkei Stock Average = sum of Adjusted stock price / Divisor(*) For a constituent to which a capping ratio is applied, price adjustment factor
will be replaced by “capped price adjustment factor”.
(1) Selection of the prices
Prices to be used for the calculation are selected in the following order of priority.
1.Special Quote or sequential trade quote 2. Traded price 3. Base priceTake an example of the index value at the close of the market. Usually, closing index
is calculated by the last traded price of each constituent. However, if a constituent
stock closes trading with special quote, such special quote is used to calculate theclosing index even if it had a traded price intraday. Special quote is declared by the
Tokyo Stock Exchange. Since the Nikkei 225 is composed of liquid stocks, prices
by the above definition 1 or 2 tend to be used intraday, and usually those by thedefinition 2, and occasionally those by the definition 1 are used for the closing index.
When there are no prices by the definition 1 or 2 during a day, “3. Base price” is used.
This is obtained based on the priority order of ex -rights theoretical price, the lastspecial quote price or sequential trade quote price, and the latest traded price up to
the preceding day.
In most cases, the price used for the calculation of the closing index on the preceding
day becomes the “Base price”. However, the exception case is that there are not any
prices and quotes on a day when a stock goes ex -right (split, for example). Since theprice on the day of ex-right is significantly changed from the prices on the preceding
day for non-market reasons, the “ex-rights theoretical price” is used for the calculation.
The theoretical price is calculated based on the price (i.e. special quote or sequenti al
trade quote or closing price) used for the calculation on the preceding day. For
example, if the closing price on the preceding day was 1000 yen for a constituent andit goes for 1 to 1.1 split today, the theoretical price for today is 909 .1 yen (=1000 /1.1) and this is the theoretical price for this constituent.
Note that in the case where a newly listed company which succeeds the substance of
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a constituent stock to be delisted due to a corporate restructuring is added on its listing
date, the base price on the first day of addition for the stock to be added shall be theprice based on the last price of the stock to be delisted used in the calcu lation of the
Nikkei 225 at the closing of the previous day of its delisting date considering with the
integration ratio and other factors.
Also note that ex-dividend is not treated as an ex-right for the calculation of the Nikkei
225.
(2) Price Adjustment Factor
Price adjustment factor (PAF) is a number which adjusts price of the constituents.
PAFs are set and revised as follows.
①Setting PAF
The PAF of a stock to be added to the Nikkei 225 is 1 . However, the value otherthan 1 (0.1 to 0.9) may be assigned provided that the price of such stock on the basedates (end of January and July) exceeds 1% of the sum of constituent prices. It is
set at the highest value which does not exceed 1% of the sum of the prices by 0.1
interval.
PAF = sum of Adjusted stock price of the constituents x 1% / the stock price of the
new constituent.
Note) PAF is evaluated on the base date and rounde d down to the nearest 0.1.
If an average daily trading value of a stock to be added is relatively low comparedwith its expected weight, the stock may be added with the PAF which is one -half(rounded up to the nearest 0.1) of the value set by the method described above. In
such case, the PAF of the stock shall be raised to the planned value at the next periodic
review in principle. When a stock of a newly established holding company is added
replacing the delisting original company, value other than 1 may be set in accordancewith the ratio of stock transfer, etc. in the establishment of the holding company.
Also note that if the stock price of the new constituent fluctuates drastically after thebase date until the effective date of the change, the PAF may be adjusted. In thiscase, such an adjustment will be announced at least 5 business days before theeffective date in principle.
②Revising PAF

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PAF is revised under the following situation.
- Large-scale stock split or reverse split
When a constituent goes for a large -scale stock split or reverse stock split, PAF isrevised to keep the price level of such a constituent unchanged . However, since the
PAF has only 1 digit after the decimal point, above adjustment calculation might
result in a fraction. Also, if a result of calculation is less than 0.1, PAF will be set as0.1. In these cases, the adjusted price before and after the split/reverse split are
different. Such difference will be adjusted by divisor. Revision of PAF under lar ge
scale stock split or reverse split will be announced at least 5 business days before theeffective date in principle.
[Note]
Japanese stocks used to have “par value”, which was abolished in October 2001.
Before October 2001, stock prices were adjusted to the par value of 50 yen, which
was a standard par value in the market. After abolishment of par value, “presumed”
par value, which modeled after the “par value” was defined, and the stock prices were
adjusted to presumed par value of 5 0 yen. At the time of introduction of the priceadjustment factor (October 1, 2021), the price adjustment factor was set, in principle,
based on then prevailing presumed par value so that the adjusted price by bothmethods are the same.

(3) Capping ratio
Capping ratio is a number which is used to temporally decrease the weight of aconstituent when such weight exceeds a certain threshold (“weight cap threshold”).
The capping ratio is applied, revised, or cancelled as stipulated below.
Weight cap threshold is 12% upon introduction at the periodic review of October 2022.
It will be reduced to 11% and 10% respectively at the periodic reviews in October
2023 and October 2024.
For a constituent to which a capping ratio is applied, the price of such a constituent
is adjusted by “capped price adjustment factor” as shown below.
Capped price adjustment factor (CPAF) = Price Adjustment Factor x capping ratio(*) CPAF is rounded down to the nearest 0.1.
- If, on the base date of a periodic review, the weight of a constituent to which any
capping ratio is not yet applied exceeds the weight cap threshold, a capping ratio of
0.9 is applied on the effective date of the constituent change resulting from the
Copyright 2023 © Nikkei Inc. All rights reserved.

9periodic review. If a capping ratio was already applied to such a constituent, capping
ratio will be decreased by 0.1. However, if no change is observed in the CPAF after
the application of the new capping ratio, the capping ratio will be decreased furth er
until there is a change in the CPAF.
- If, on the base date of a periodic change, weight of a constituent to which a CPAF isapplied is below 5%, the capping ratio will be increased by 0.1 on the effective dateof the constituent change resulting from the periodic review. However, if no chan ge
is observed in the CPAF after the application of the new capping ratio, the capping
ratio will be increased further until there is a change in the CPAF. If the new capping
ratio after the increment is 1, capping ratio will be cancelled.
- When a constituent to which CPAF is applied goes for a large -scale stock split orreverse split and the PAF is adjusted by the ratio of split or reverse split, the capping
ratio may be revised so that the new CPAF does not change the weight of theconstituent. For such a constituent, the capping ratio may have fractions after 0.1
and be increased/decreased by the number other than 0.1 in the next revision of the
capping ratio.
- In principle, the capping ratio is applied, revised, or cancelled on the effective dateof the constituent change resulting from the periodic review. However, dependingon the liquidity of the constituent, changes in the capping ratio may be implemented
in two or more steps.
(4) Divisor
The Nikkei 225 is calculated as adjusted price average where the weight is based on
the price adjustment factor.
This is basically an arithmetic average and thedenominator was a number of constituents initially. Since then, there have beenchanges in the constituents etc., and the denominator has been adjusted to maintainthe continuity of the index. This denominator is called the “Divisor”.
When constituents are changed, the sum of stock prices (=numerator) changes by theprices of additions and deletions. If the denominator is not changed in such cases,
the index today will be different from the closing ind ex on the previous day even if
the prices of all individual constituents are the same.
To keep the index unchanged from such non -market events, the divisor is changed.
Points on the divisor change are as follows.

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①Divisor is recalculated when the following events happen.
i) Changes in the constituentsii) Corporate action such as split, reverse split, paid -in capital increase. However,when the split or the reverse split is in a large scale, the price adjustment factor
may also be adjusted. The divisor may not be changed so long as the adjusted
price is unchanged before and after such split/reverse split.
iii) Capping ratio application, revision, cancellation or raising the PAF to theplanned value for a stock whose PAF was one -half of the planned value.
②Calculation of the divisor change is as follows.
Divisor tomorrow = Divisor today x (sum of “base price for the next day constituents”)/ (sum of “closing price of today’s constituents ”)(*) All prices are adjusted by the PAF. The “next day” means the next business day.
Closing price of today’s constituents = The price used to calculate the closing index
on the last day before an event (= today) x PAF for today
Base price for the next day constituents = The base price for the next day x PAF forthe next day
Please note that for stocks for which capping ratio has been applied, the CPAF is used
to adjust the price instead of the PAF.
③9th digit is rounded to make the divisor to have 8 digits after the decimal point.
(5) Miscellaneous①Calculation day and time:
On trading day and during trading hours of the Tokyo Stock Exchange②Calculation intervals:
Every 5 seconds since July 18, 2017. From January 4, 2010 to July 14, 2017, 15
seconds and before then, 1 minute. The opening price is currently calculated at 5
seconds past 9 am.

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③Digits after the decimal point:
2 (3th digit is rounded)④Real time (Intraday) calculation:
Intraday calculation started on Monday, March 25, 1985 ( 1-minute interval). Since
then there are open, high, low indices in addition to the close.

4: Others(1) Index License
The Nikkei Stock Average is a copyrighted material calculated in a methodology
independently developed and created by Nikkei Inc. (“Nikkei”) and Nikkei is the sole
exclusive owner of the copyright and other intellectual property rights in the N ikkei
Stock Average itself and the methodology to calculate the Nikkei Stock Average.
Commercial use of the Nikkei Stock Average must be licensed by Nikkei. Such uses
include, but not limited to, provision of derivative products such as futures and options,creation and marketing of linked funds or linked securities, or distribution of the index
for the data and analytic services.
(2) Disclaimer
Nikkei has no obligation to publish the Nikkei Stock Average continuously, and Nikkei
is not responsible for any error, delay or omission in the Nikkei Stock Average.
Nikkei is entitled to change the details of the Nikkei Stock Average and to suspend or
stop the calculation and the announcement of the index.
Although, in principle, the Nikkei Stock Average is calculated and maintained inaccordance with the information provided here, Nikkei has discretion to take measures
Nikkei deems appropriate when the events which are not covered in this document
happen or under the circumstances where it is difficult to continue to calculate theindex using the current rules.
In addition, the specifications described may be amended without notice.
does not assume any loss or damage caused by the use of this document.

NikkeiThis English document may not be an entirely accurate translation of the original
Japanese document. In any case where differences arise between the English version
and the original Japanese version, the original Japanese document will prevail.
Copyright 2023 © Nikkei Inc. All rights reserved.

12

(3) Contact
Index Business Office, Nikkei Inc.
Email: index@nex.nikkei.co.jp

Copyright 2023 © Nikkei Inc. All rights reserved.

13

Appendix : Change history of Index Guidebook
December 30, 2011 version

Initial version

July 18, 2017 version

Due to the calculation intervals change (every 5 sec.),
revise the description in “3: Calculation method (4)Miscellaneous”

June 15, 2020 version

⚫

⚫

⚫

October 1, 2021 version

⚫

⚫

⚫

⚫

April 4, 2022 version⚫

⚫

Revise the description in “ 2: ConstituentsManagement (3)Extraordinary Replacement ①
Events of subjects and ⑤ Effective dates forconstituent changes”
Delete an example in “ 2: Constituents Management(4)Notes for the constituents management ③
General matters”
Revise an example in “3: Calculation method (2)Presumed par value”
Revise “2: Constituents Management,(4) Notes, ①
About Periodic Review” (maximum number of
constituent change is added)
Replace “3: Calculation method, (2) Presumed parvalue” by “3: Calculation method, (2) Price
Adjustment Factor”
Revise “3: Calculation method, (3) Divisor, ②Calculation of the divisor change
Replace “Presumed par value” by “Price adjustment
factor” throughout the text.
Delete and revise
explanations of the presumed par value.
Replace “Tokyo Stock Exchange First Section” by“Tokyo Stock Exchange Prime Market ” totally inline with the subject market change
Revise “① Reasons for deletion” and “⑤ Effective
dates of constituent changes” in “2: ConstituentsManagement, (3) Extraordinary Replacement” dueto adding a designation on “Securities on Alert” tothe deletion criteria

July 19, 2022 version⚫

Revise the number of digits after the decimal pointin “3: Calculation method (3) Divisor ③ ”

September 29, 2022 version⚫

Revise the preamble and “(2) Periodic Review” inCopyright 2023 © Nikkei Inc. All rights reserved.

14

⚫

⚫

October 2, 2023 version

⚫

⚫

⚫

⚫

“2: Constituents Management”
Add “(3) Capping ratio” in “3: Calculation method”(numbers to the items following (3) will be
increased by 1)
Revise the description in “3: Calculation method (4)Divisor” in line with the addition of item iii)
Add the description in case when new listed stock
is replaced a delisted constituent in “ 2: ConstituentsManagement (3)Extraordinary Replacement ⑤
Effective dates of constituent changes ”
Add the description regarding the treatment of baseprice in case when a newly listed company is addedon its listing date in "3: Calculation method (1)Selection of the prices"
Add the description regarding the stepwise additionin "3: Calculation method (2)Price Adjustment
Factor ① Setting PAF"
Add the description regarding the stepwise additionin "3: Calculation method (4)Divisor"

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15

Nikkei Stock Average Constituents Selection Rules
Stocks are added to or deleted from the Nikkei Stock Average (Nikkei 225) inaccordance with the following rules. These rules shall become effective from
October 2, 2023 and are subject to change to make the index a better measure of themarket and to deal with necessary changes in the market environment, economic
substance, or regulations.
1: Constituents
The Nikkei 225 is calculated with 225 market representative stocks from the Tokyo
Stock Exchange Prime Market.
By calculating with highly liquid stocks, the index is aimed at fulfilling two objectives,
one is to maintain its long-term continuity and the other is to reflect the changes in
the industry structure.
2: Rules of the Periodic Review
Constituents are reviewed twice a year as evaluated at the end of January and July(base dates) in accordance with the following rules. Results of the review become
effective on the first trading day of April and October. The maximum number of
constituents reshuffled at a periodic review is 3. However, constituent change due
to corporate reorganization near the time of periodic review is not included in thelimit of 3 above.
(1) Assessment of the liquidity (“High Liquidity Group”)
Choose highly liquid stocks from the Tokyo Stock Exchange Prime Market and groupthem as the “High Liquidity Group”. The measures to assess the liquidity are :① Trading value of the preceding 5 years② Magnitude of price fluctuation by trading value (defined as (high price/low price)/
trading value) in the preceding 5 years
Top 450 (double the constituent count for the index) most liquid stocks in terms oftwo measures constitute the “High Liquidity Group”.
(2) Deletion of low liquidity constituents (absolute criteria for deletion)
Those constituents not in the High Liquidity Group (ranked 451 or lower) are deleted
from the index.

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(3) Addition of high liquidity stocks (absolute criteria for addition)
Of the “High Liquidity Group” stocks, those ranked 75 or higher and not currently inthe list of the constituents are added to the index.
(4) Deletion/Addition based on the sector balance (relative criteria)① The 450 most liquid issues will be categorized into six industrial sectors –Technology, Financials, Consumer Goods, Industrial Materials, Capital Goods/Others
and Transportation/Utilities.
The “Appropriate number of the constituents” isdefined as half of the number of stocks in each sector.
② After the changes by (2) and (3) are considered, a rebalancing is conducted if anyof the sectors are over-represented or under-represented. Degree of representation isevaluated by comparing the actual number of constituents in the sector against the“Appropriate number”.
i) For over-represented sectors, current constituents in the sector are deleted in theorder of the liquidity (low liquidity first) to correct the overage.
ii) For under-represented sectors, non-constituent stocks are added from the “High
Liquidity Group” in the order of the liquidity (high liquidity first) to correct the
shortage.
③ The six-sector breakdown is based on the Nikkei industrial classification of 36
industries. Each sector may be regrouped if a change in industrial structure makes
adjustment necessary.
i) Technology
Pharmaceuticals, Electric Machinery, Automobiles & Auto parts, Precision
Instruments, Communicationsii) Financials
Banking, Other Financial Services, Securities, Insuranceiii) Consumer Goods
Fishery, Foods, Retail, Servicesiv) Materials
Mining, Textiles&Apparel, Pulp & Paper, Chemicals, Petroleum,
Glass&Ceramics, Steel, Nonferrous Metals, Trading Companiesv) Capital Goods / Others
Construction, Machinery,

Shipbuilding,Transportation

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Equipment,

Rubber,Other
2

Manufacturing, Real Estatevi) Transportation / Utilities
Railway&Bus, Land Transport, Marine Transport, Air Transport, Warehousing,Electric Power, Gas
3: Extraordinary Replacement Rules(1) Deletion for special reasons
Constituents which meet the following criteria are deleted from the index.
i) Designated as a “Securities to be Delisted” or “Securities on Alert”ii) Delisted due to corporate restructuring such as merger, share exchange or sharetransferiii) Transfer to the market other than the Prime
A constituent designated as “a Security under Supervision” remains to be a constituent
at the time of designation. However, Nikkei may replace such a constituent with a
pre-announcement when it is highly inappropriate to keep the stock as a constituent,e.g. probability of delisting is extremely high.
(2) Procedure to add new constituents
When a constituent is deleted because of the reasons of (1) above, a stock to be added
will be selected, in principle, from the same sector in the “High Liquidity Group” inthe order of liquidity.
Notw i thstanding the preceding paragraph, following rules may apply depending on thetiming and circumstances of the deletion.
① When such deletion is scheduled close to the Periodic Review, additional stocks
may be selected in a part of the periodic review process.
② When multiple deletions are scheduled in a season other than the Periodic
Review, additions may be selected using (3) and (4) of Periodic Review Rules
by assessing the liquidity and the balance of the sectors.
( 3 ) Ti m i n g o f t h e c o n s t i t u e n t c h a n g e
In principle, for each reason under 3(1), constituents are deleted and added as follows.
The effective date is announced for each event.
i) Designated as a “Security to be Delisted” or “Securities on Alert”: five business days
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3

after the designation.
ii) Delisted due to corporate restructuring such as merger, share exchange or sharetransfer and iii) Transfer to the market other than the Prime: effective date of the event.
However, in case that a constituent stock is delisted due to a corporate restructuring
and a stock of a company which succeeds the substance of the delisting company isadded, the newly listed stock will replace on the date of its listing in principle.
In case that a constituent designated as a stock under supervision is deemed as highly
inappropriate and will be deleted, the announcement will be made approximately two
weeks before its effective dat e. Even if such a constituent is designated as a stock to
be delisted before the pre-announced effective date, the pre-announced effective datesurvives.
(4) Special rules for additions
As the types of corporate reorganization diversify, procedures as exemplified below,
which follows the reality better, may be applied to choose the stocks to be added.
Application of these special rules is determined for each case.
① Under the following cases, a stock of a company which will succeed the substanceof the delisting company will be added in principle, provided such company mustbe listed or will be listed within a short period in the Tokyo Stock Exchange Prime
Market.
Stock of a surviving company in mergers where a constituent is merged anddelisted.
ii) Stock of a newly established parent company by share transfer or a new parent
company receiving shares from a constituent by exchange.
i)② When a company is split and multiple companies maintain listing in the Tokyo
Stock Exchange Prime Market, a stock of a company which succeeds the major
operation will become a constituent.
4: Special procedures to implement constituent change
For both “2. Periodic Review” and “3. Extraordinary Replacement”, deletion andaddition are made effective on the same day to keep the number of constituents at 225.
However, when necessary, additions are made after the deletions and during such
period, the index may be calculated with less than 225 constituents. Divisor isadjusted at times when constituents are deleted or added to warrant the continuity.
5: Decision of the deleting and adding stocks

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After consultation with academics and market professionals, Nikkei Inc. decides andannounces the list of deleting and adding stocks.

Copyright © Nikkei Inc. All rights reserved.

5Appendix : Change history of Constituents Selection Rules
February 1, 2002 version

Revise the description in“3:
Extraordinary
Replacement Rules (3)Timing of the constituentschange”

June 15, 2020 version⚫

⚫

October 1, 2021 version⚫

⚫

April 4, 2022 version⚫

⚫

Revise the description in “3: Extraordinary
Replacement Rules (1)Deletion for special reasonsand (3)Timing of the constituents change”
Delete an example in “4: Special procedures toimplement constituents changes”
Revise “2: Rules of the Periodic Review” setsmaximum number of constituents reshuffled as 3
Definition of “Magnitude of price fluctuation by
volume” added to 2(1)②Replace “Tokyo Stock Exchange First Section” by“Tokyo Stock Exchange Prime Market” in line withthe subject market change
Revise “(1) Deletion for special reasons” and “(3)Timing of constituent change” in “3: Extraordinary
Replacement Rules” due to adding a designation on“Securities on Alert” to the deletion criteria

May 20, 2022 version⚫

Correction of error in “2: Rules of the Periodic
Review”

September 29, 2022 version⚫

Revise the preamble and “(1)Assessment of theliquidity (“High Liquidity Group”)” in “2: Rules of
the Periodic Review” Periodic review is increased
to twice a year and the denominator of the“Magnitude of price fluctuation ” is changed to the
trading value.

October 2, 2023 version⚫

Revise the description in “3: Extraordinary
Replacement Rules (3)Timing of the constituentschange”
Delete an example in “4: Special procedures toimplement constituent change”⚫

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