How to Invest in the Japanese Stock Market

The Tokyo Stock Exchange (TSE) is the principal Japanese stock market and is one of the world's largest, listing over 2,000 Japanese companies in addition to several dozen foreign companies. In terms of the monetary value of the exchange volume, the TSE is one of the top stock markets in the world.

Difficulty:

Moderate

Instructions

Things You'll Need

• Financial adviser (recommended)
• Capital to invest
• Properly licensed stockbroker

1. Get familiar with the three major indexes used to track developments in the Tokyo Stock Exchange. These are, first, the Nikkei 225 index of major companies as chosen by Japan's most popular business paper, the "Nihon Keizai Shimbun." The second is the TOPIX index, and the J30 index is also commonly used to track Japanese big business.

2. Open a trading account with a large, well-known brokerage. To invest in the Japanese stock market, your order will have to be routed to a licensed member of the Tokyo Stock Exchange. Larger brokerages have the best and most reliable access to TSE members.

3. Deposit capital into your new trading account, keeping in mind that it is unwise to place all your eggs in one basket. Make sure you have a contingency fund in place to cover your back in the event you lose your shirt in the Japanese stock market.

4. Work with your financial adviser to identify Japanese companies that you want to invest in. If you prefer to do your own digging, a good place to get started is on the Tokyo Stock Exchange's official English-language website (see Resources below).

5. Research Japanese companies using the same methods you would use to research domestic companies. If you have no experience researching stocks, pick up a comprehensive introductory guide to stock investing from your local bookstore and spend some time reading before you head into the real world. Keep in mind that it may be difficult or costly to obtain copies of Japanese companies' financial statements.

6. Place an order to buy the Japanese stock of your choice with your brokerage. Your stockbroker will then forward your request to a Tokyo Stock Exchange member for filling. The time delay involved may mean that the actual price of the stock could differ from your quote by the time your order is actually processed.

Tips & Warnings

• Remember that currency exchange rates can also lead to profits in the Japanese stock market. If you buy a company and its share price holds steady, but the Japanese yen falls against the U.S. dollar, you make money.

Resources

• English-language version of the Tokyo Stock Exchange