The Tokyo Stock Exchange (TSE): Understanding its Structure, Key Companies, and Ongoing Reforms

The Tokyo Stock Exchange (TSE) is the nucleus of Japan’s financial market, situated in Tokyo and inaugurated on May 15, 1878. Managed by the Japan Exchange Group, it stands as the largest stock exchange in Japan, boasting 3,784 listed companies as of September 2021. Distinguished corporations such as Toyota, Honda, and Mitsubishi find their place on the TSE.

The TSE encountered a significant contraction from 1991 to 2001, paralleling Japan’s economic downturn post the burst of equity and real estate bubbles. Despite the challenges, it remains a cornerstone for major companies like Toyota, Softbank, Keyence Corporation, Sony Corporation, and Chugai Pharmaceutical.

The TSE’s organizational framework comprises five sections. The first two, known as the “Main Market,” encompass large and medium-cap companies. The remaining sections cater to startups, including “Mothers” focusing on high-growth and emerging stocks, “Jasdaq” dividing into standard and growth sub-sections, and the “Tokyo Pro Market” exclusively for professional investors.

At its peak in December 1989, the Nikkei 225 index reached a record high of 38,916.2. Over the subsequent two decades, the TSE’s market capitalization experienced a notable decline. As of September 2021, key figures overseeing the Tokyo Stock Exchange include Director Tsuda Hiroki, Director & Representative Executive Officer, Group CEO Kiyota Akira, and Director & Representative Executive Officer, Group COO Yamaji Hiromi.

The five largest stocks by market capitalization listed on the Tokyo Stock Exchange as of the end of July 2021 were Toyota Motor Corporation (¥319,936), Keyence Corporation (¥147,724), Sony Group Corporation (¥143,445), SoftBank Group Corp. (¥117,798), and Recruit Holdings Co. (¥95,465).

Beyond the TSE, significant global exchanges include the New York Stock Exchange (NYSE), Nasdaq, and the London Stock Exchange (LSE). Each exchange adheres to specific listing requirements, demanding regular financial reports and minimum capital. For instance, NYSE necessitates a minimum of 1.1 million publicly traded shares at $4 per share, along with aggregate pre-tax income of $10 million in the past three fiscal years.

Critics argue that over the years, the TSE has grown excessively complex and large compared to its global counterparts. With five sections, each having distinct listing requirements, concerns arise. The plan for reform contemplates simplifying criteria, consolidating sections into Prime, Standard, and Growth, and potentially increasing market cap requirements to streamline the exchange.

The Tokyo Stock Exchange comprises five sections, including the Main Market, Mothers, Jasdaq, and Tokyo Pro Market.

The Tokyo Pro Market is exclusively reserved for professional investors, providing a platform for sophisticated investment activities.

Yes, discussions are underway to simplify listing criteria, consolidate sections, and potentially increase market cap requirements to enhance the efficiency of the exchange.

The TSE plays a central role by hosting major Japanese corporations and offering diverse sections catering to companies of varying sizes, contributing to the global financial ecosystem.