TOPIX restructuring to reduce constituent stocks to 986

The Japan Exchange Group (JPX) has announced a major restructuring of the Tokyo Stock Price Index (TOPIX) to enhance the index's value and stimulate market activity. The reform involves tightening the criteria for constituent stocks, focusing on companies that actively work to improve corporate value and increase market capitalization of floating shares.

In the upcoming reorganization scheduled for late October, 35 new companies will be added to the index, including the taxi-hailing app GO, McDonald's Holdings Japan, and Workman. Conversely, 683 existing companies will be designated as 'transitional measure stocks.' These companies face potential removal if they fail to meet the stricter requirements by the next re-evaluation in October 2027. If criteria are not met, they risk being excluded from the index by July 2028.

Over the next two years, the total number of TOPIX constituent stocks is expected to decrease from 1,636 to approximately 986, a reduction of about 40 percent. This shift is expected to increase pressure on listed companies to demonstrate strong earning capabilities and maintain high market capitalization.