Japan Markets ViewThe Second Stage of TOPIX Revisions Approaches: Number of Constituents May Fall Below 1,000

 

[Kiwamu Kawaguchi, QUICK Market Eyes] Less than two months remain until the end-of-August base date for the second stage of the Tokyo Stock Price Index (TOPIX) revisions scheduled for October 2026. Stocks listed on any of the three market segments—Prime, Standard, and Growth—will be eligible for inclusion. The periodic review will begin based on criteria such as the percentage of cumulative free-float adjusted market capitalization and the annual traded value ratio. The number of constituents in the next-generation TOPIX (next-gen TOPIX) was initially expected to be between 1,100 and 1,200. As of the end of June, however, the expansion of the market capitalization of Japanese stocks overall and large-cap stocks has raised the likelihood that the next TOPIX will be narrowed to fewer than 1,000 stocks. Competition among companies to maintain their inclusion in the index is expected to intensify further.

The TOPIX revisions, which use the end of August as the base date and will introduce a new framework in October, represent the second stage of the process. The first stage was already completed in January 2025. The number of constituent stocks, previously around 2,200, decreased to about 1,700 upon its completion. The second stage will cover all Tokyo Stock Exchange (TSE) markets, placing a greater emphasis on liquidity. At a regular press conference on June 19, Hiromi Yamaji, CEO of Japan Exchange Group (JPX), reiterated the purpose of the revisions. He stated, “The goal is to enhance how accurately it represents the market and functionality as an investable index, thereby improving convenience for all investors.”

 

*Excerpt from materials published by Japan Exchange Group (JPX), “Overview of Revisions of TOPIX and Other Indices”

When JPX Market Innovation & Research (JPXI) of the Japan Exchange Group announced the new TOPIX rules in September 2024, it estimated that the number of next-gen TOPIX constituents under the rules would be between 1,100 and 1,200. However, the overall rise in Japanese stocks, particularly inflows into large-cap stocks, has significantly raised the threshold for the percentage of cumulative free-float adjusted market capitalization. According to calculations by QUICK, the free-float adjusted market capitalization threshold for exclusion from the next-gen TOPIX rose to JPY25 bn as of the end of March 2025. It reached JPY29 bn at the end of September and surpassed JPY32 bn at the end of December, 2025. Just six months later, as of the end of June 2026, the threshold had risen to more than JPY40 bn.

According to QUICK calculations as of the end of June, there were 35 candidates for new inclusion in the next-gen TOPIX. Meanwhile, 713 stocks were candidates for exclusion from the current TOPIX. Since the number of TOPIX constituents was 1,638 as of the end of June, calculations at that point indicate that the next-gen TOPIX will consist of more than 960 stocks. Chizuru Morishita, a researcher at NLI Research Institute, attributes the decrease in constituent stocks to specific factors. She notes, “This is primarily because the increase in the weight of free-float adjusted market capitalization has been concentrated heavily on the top 30 stocks until recently.”

 

*QUICK calculations for the next-gen TOPIX as of the end of June 2026

Movements anticipating the new TOPIX framework have already emerged in the market. One active institutional investor revealed, “Due to the overall market rally, it has become difficult to chase alpha (excess returns). Therefore, we are shorting stocks that have a possibility of being excluded from the TOPIX.” A dealer at a local securities firm also commented, “We are buying stocks that have the potential to be newly included in the TOPIX from a medium- to long-term perspective, while also considering supply and demand trends.”

For August, which includes the first base date for the second stage of the TOPIX revisions, stock price trends throughout the entire month will determine inclusion or exclusion, rather than just the status at the “end” of the month. This is because the free-float adjusted market capitalization will be determined based on the daily average in the base month. Morishita of NLI Research Institute provided an analysis on this matter. She stated, “There is a possibility that companies near the threshold for exclusion will increasingly take actions to boost their stock prices, such as establishing new shareholder benefit programs or upwardly revising their earnings forecasts.” It promises to be a hot summer for companies as they fight for survival and inclusion in the TOPIX, an index that represents Japan.
（Reported on July 2, 2026）

 

 

Related dataset – TOPIX Inclusion / Exclusion Criteria:
Data needed to find out constituents of the next-generation TOPIX

Related article – Companies’ Actions to Remain in TOPIX

Disclaimer
https://corporate.quick.co.jp/en/terms/#disclaimer

Back to Japan Markets View Top