Episode 1: What is the Nikkei Stock Average? 🤔
"What are stocks?" "I often hear about the 'Nikkei Stock Average' in the news, but what exactly is it?"
If you have these questions, you're in the right place! In this page, we'll explore the true nature of the "Nikkei Stock Average" together!
First, what are "Stocks"?
Imagine you've made an amazing invention and want to start a company to do big business. But you need a lot of money to build factories or hire people, right? In such cases, companies issue something called "shares (or stocks)" to raise money from people who want to support them (these people are called "shareholders").
Shareholders who buy stocks own a part of that company. If the company does well and makes a profit, shareholders might receive dividends (a share of the profit) or the value of their stocks might increase.
Then, what are "Stock Prices"?
A "stock price" is the price per share of that stock. Stocks are bought and sold daily by many people in a place called the "market" (this is called "trading").
Stocks of popular companies tend to see their prices go up because many people want them. Conversely, if people think, "Hmm, is this company doing okay...?", the price might go down. Stock prices are like a mirror reflecting a company's popularity and future prospects.
Now for the Main Topic! What is the "Nikkei Stock Average"?
There are many companies in Japan, and many of them issue stocks. So, if you want to know the overall health of Japan's economy, what do you think you should do?
That's where the "Nikkei Stock Average" comes in! It's calculated by a newspaper company called "Nihon Keizai Shimbun, Inc." They select 225 major companies representative of Japan and calculate an average of their stock prices using a special method.
Think of it like the average test score of 225 representative students in a class. By looking at that average score, you can generally tell if the class as a whole did well or was a bit sluggish. The Nikkei Stock Average is an important "yardstick" for gauging the overall health of the Japanese economy.
Why is the Nikkei Stock Average so Important?
- Japan's Economic "Thermometer" 🌡️: If the Nikkei Average rises, it suggests, "Oh, the Japanese economy might be doing well!" If it falls, "Hmm, maybe it's a bit under the weather?" It provides clues about the overall economic condition.
- A News Regular 📰: You often hear on TV or read in newspapers, "Today, the Nikkei Average rose by XX yen to close at YY yen." This shows how much attention it gets.
- Investors' Compass 🧭: People who invest in stocks use the Nikkei Stock Average's movements as a reference when deciding when to buy or sell stocks.
- Companies and Government are Watching 👀: CEOs of large companies and policymakers also check the Nikkei Stock Average to understand the current state of the economy.
So, have you got a better idea of what the Nikkei Stock Average is?
On the next page, we'll look at when and how this Nikkei Stock Average began, exploring the starting point of its history!