<Nikkei Index Consultation>
May 10, 2023
Nikkei Inc.
Index Consultation Regarding the Introduction of the “Stepwise Addition” and Changes
to the “Technical Listing” Rules of the Nikkei Stock Average
Nikkei Inc. is considering amendments to the methodology of the Nikkei Stock
Average (Nikkei 225) to better serve the users of the index either as a measure of themarket or as an underlying for financial products.
Nikkei 225 is the best-known index of the Japanese equity market and widelyused not only for evaluation of the equity market but for various financial assets. Nikkeikeeps the basic features of the index unchanged, namely, its constituents selected fromhighly liquid stocks with considerations to the industrial sector balance. It will continue
to be calculated as a price-weighted index and maintains continuity of the index withhistory of more than 70 years.
Based on the above policy, Nikkei intends to amend the methodology inconsideration of the impact it might have on the market where the size of the assets linked
to the index needs attention. Nikkei values the opinions received through thisconsultation and will continue to review the rules of the Nikkei 225 to reflect the changes
in the market in the future.
Nikkei consults on the specific subjects listed below. The changes will be
implemented from the autumnal periodic review in the year of 2023.
① Introduction of the “Stepwise Addition” to the constituents of the Nikkei 225
For stocks with relatively low trading values to their expected weights in theNikkei 225, such stocks will be added to the index in two steps in order to reduce theimpact at the time of their additions. Specifically, the price adjustment factor (PAF) ofthe stock will be set at half of the originally planned value when the stock is newly added
to the index. The second inclusion will be made at the next periodic review and the PAFof the stock is raised to the originally planned value.
1Example) In case of the split adoption is applied to a stock that is planned tobe newly adopted with PAF of 1 at the periodic review in October 2023
- The PAF at the time of new adoption in October 2023 ... 0.5- The PAF to be applied from the next periodic review in April 2024 ... 1For more details on this amendment, please see the proposed changes to theindex guidebook below.
[Index Guidebook] 3: Calculation method (2) Price Adjustment Factor ①Setting PAF
Current Rule
Proposed new rule
The PAF of a stock to be added to the The PAF of a stock to be added to theNikkei 225 is 1. However, the value Nikkei 225 is 1. However, the value
other than 1 (0.1 to 0.9) may be assigned other than 1 (0.1 to 0.9) may be assigned
provided that the price of such stock on thebase dates (end of January and July)exceeds 1% of the sum of constituent
prices. It is set at the highest value which

provided that the price of such stock on thebase dates (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 does not exceed 1% of the sum of theprices by 0.1 interval.
prices by 0.1 interval.
PAF = sum of Adjusted stock price of the PAF = sum of Adjusted stock price of theconstituents x 1% / the stock price of the constituents x 1% / the stock price of the
new constituent.
new constituent.
Note) PAF is evaluated on the base date Note) PAF is evaluated on the base dateand rounded down to the nearest 0.1.
and rounded down to the nearest 0.1.
When a stock of a newly establishedholding company is added replacing thedelisting original company, value otherthan 1 may be set in accordance with theratio of stock transfer, etc. in theestablishment of the holding company.

If an average daily trading value of a stock
to be added is relatively low comparedwith its expected weight, the stock may beadded with the PAF which is one-half(rounded up to the nearest 0.1) of the value
set by the method described above. In suchcase, the PAF of the stock shall be raised
Also note that if the stock price of the new to the planned value at the next periodic
constituent fluctuates drastically after the review in principle.

When a stock of a2base date until the effective date of thechange, the PAF may be adjusted. In thiscase, such an adjustment will beannounced at least 5 business days before
the effective date in principle.

newly established holding company isadded replacing the delisting originalcompany, value other than 1 may be set inaccordance with 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 thechange, the PAF may be adjusted. In thiscase, such an adjustment will beannounced at least 5 business days before
the effective date in principle.

[Index Guidebook] 3: Calculation method (4) Divisor - Points on the divisor change①
Current Rule

Proposed new rule

① Divisor is recalculated when thefollowing events happen.
i) Changes in the constituentsii) Corporate action such as split, reversesplit, paid-in capital increase. However,when the split or the reverse split is in alarge scale, the price adjustment factor
may also be adjusted. The divisor may not
be changed so long as the adjusted price is① Divisor is recalculated when thefollowing events happen.
i) Changes in the constituentsii) Corporate action such as split, reversesplit, paid-in capital increase. However,when the split or the reverse split is in alarge scale, the price adjustment factor
may also be adjusted. The divisor may not
be changed so long as the adjusted price isunchanged before and after such unchanged before and after such
split/reverse split.
split/reverse split.
iii) Capping ratio application, revision, or iii) Capping ratio application, revision,cancellation.
cancellation or raising the PAF to theplanned value for a stock whose PAF was
one-half of the planned value.
② “Technical Listing” stock be replaced on its listing dateIn case where a constituent stock is delisted due to a corporate restructuring, such3as establishing a holding company, and a new company succeeding the substance of thedelisting company is promptly listed ("Technical Listing"), the new listed stock will
replace the delisted constituent on the first date of its listing (generally two business days
after the delisting date of the constituent stock) in principle.
In this case, such delisted stock will remain as a constituent of the Nikkei 225
after delisting until the new company is listed. After the delisting and until thereplacement, the Nikkei 225 will be calculated using the price for the delisted stock which
is used to calculate the closing price of the index on the day before the delisting date.
Before this amendment, such delisted stock was removed on the day of delisting,while a newly listed company succeeding the substance of the delisting company wasadded on the day following its listing date. As the exclusion and the addition were noton the same day, the Nikkei 225 was calculated on 224 stocks (when the target was onestock) during that period.
For more details on this amendment, please see the proposed changes to theindex guidebook and the Constituents Selection Rules below.
[Constituent Selection Rules] 2: Extraordinary Replacement Rules (3) Timing of theconstituent change
Current Rule

Proposed new rule

In principle, for each reason under 3(1),constituents are deleted and added asfollows. The effective date is announced
for each event.

In principle, for each reason under 3(1),constituents are deleted and added asfollows. The effective date is announced
for each event.

i) Designated as a “Security to beDelisted” or “Securities on Alert”: fivebusiness days 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 theevent.

i) Designated as a “Security to beDelisted” or “Securities on Alert”: fivebusiness days 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 theevent.
However, in case that aIn case that a constituent designated as a constituent stock is delisted due to a
stock under supervision is deemed as corporate restructuring and a stock of a4highly inappropriate and will be deleted,the announcement will be madeapproximately two weeks before its
effective date. 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.

company which succeeds the substance ofthe delisting company is added, the newly
listed stock will replace on the date of its
listing in principle.
In case that a constituent designated as astock under supervision is deemed ashighly inappropriate and will be deleted,the announcement will be madeapproximately two weeks before its
effective date. 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.

[Index Guidebook] 3: Calculation method (1) Selection of the prices
Current Rule

Proposed new rule

Prices to be used for the calculation are Prices to be used for the calculation are
selected in the following order of priority. selected in the following order of priority.
1. Special Quote or sequential trade quote 1. Special Quote or sequential trade quote
2. Traded price
2. Traded price3. Base price3. Base price<snip><snip>The theoretical price is calculated based The theoretical price is calculated basedon the price (i.e. special quote or on the price (i.e. special quote orsequential trade quote or closing price)used for the calculation on the precedingday. For example, if the closing price on
the preceding day was 1000 yen for aconstituent and it goes for 1 to 1.1 split
today, the theoretical price for today is909.1 yen (=1000 / 1.1) and this is thetheoretical price for this constituent.

sequential trade quote or closing price)used for the calculation on the precedingday. For example, if the closing price on
the preceding day was 1000 yen for aconstituent and it goes for 1 to 1.1 split
today, the theoretical price for today is909.1 yen (=1000 / 1.1) and this is thetheoretical price for this constituent.

Also note that ex-dividend is not treated as Note that in the case where a newly listed
5an ex-right for the calculation of the company which succeeds the substance of
Nikkei225.
a constituent stock to be delisted due to a
corporate restructuring is added on its
listing date, the base price on the first dayof addition for the stock to be added shallbe the price based on the last price of thestock to be delisted used in the calculationof the Nikkei 225 at the closing of theprevious day of its delisting dateconsidering with the integration ratio andother factors.
Also note that ex-dividend is not treated as
an ex-right for the calculation of theNikkei225.
[Question]
Do you agree to the following proposed amendments?
1. Introduction of the stepwise addition to the constituents of the Nikkei 225
2. “Technical Listing” stock which succeeds the substance of the constituent to bedelisted replaces on its listing date
3. If you have opinions or ideas to further improve the Nikkei 225, please provide.
Please submit your feedback to the consultation section at the following URL.
https://indexes.nikkei.co.jp/en/nkave/governanceConsultation closing date:June 12, 2023 (JST)

Although your contribution to this consultation is respected, Nikkei decides at its own
discretion. The result of the consultation will be informed as a formal announcement of
the new methodologies. Your contribution will not be published although a summary
may be used in our documents preserving anonymity.
Contact: https://www1.entryform.jp/nikkei_indexes_contact_en/6