TOPIX's first liquidity-based periodic review takes effect, adding 35 stocks and starting a two-year weight cut for 683 others

The review

JPXI published the results of the first periodic review on 7 October 2026, with an effective date of 30 October 2026. The document lists 35 issues to be added, all of them Standard Market or Growth Market companies. It also lists 683 “issues subject to transitional measures”, and 1,669 constituent issues as of 30 October 2026.

Under the second stage of revisions, JPX says, “all market segments will become the index universe, and periodic reviews will be carried out based on liquidity criteria” (JPX). JPX says periodic reviews of issues in all three segments (Prime, Standard and Growth) will be conducted “with a greater emphasis on liquidity” (JPX).

How the transition works

The TOPIX index guidebook says the weights of constituents not selected for continuation “will be reduced in eight stages on the last business day of each quarter starting on the last business day of October 2026 and ending on the last business day of July 2028”. This is done by multiplying each issue’s free-float weight by a transition factor.

The guidebook sets out the schedule:

• 0.875 at the end of October 2026
• 0.750 in January 2027
• 0.625 in April 2027
• 0.500 in July 2027
• 0.375 in October 2027
• 0.250 in January 2028
• 0.125 in April 2028
• zero in July 2028, when the remaining issues are removed

Issues subject to transitional measures will be re-evaluated with a base date of the last business day of August 2027. For those that meet the continuation criteria, the transition factors “will stop decreasing”, staying at the fourth-stage factor of 0.500 (guidebook). JPX gives those continuation criteria as an annual traded value ratio of “0.14 or more” and a place in the top 97% of cumulative free-float adjusted market capitalisation. The second periodic review is due in October 2028.

TOPIX Next-tier

JPX said on 30 October that JPXI “will begin calculating ‘TOPIX Next-tier’”, an index that “consists of issues not selected for TOPIX (including those subject to transitional measures) which have a certain level of liquidity”. JPX’s revisions page says the launch coincides “with the first TOPIX periodic review (October 2026)”.

The TOPIX Next-tier guidebook says the index is weighted by market capitalisation, with a base date of 29 October 2026 and a base value of 1,000. It selects constituents with an annual traded value ratio of 0.1 or more and a place in the top 99% of cumulative free-float adjusted market capitalisation. Issues selected for TOPIX in the same year’s review are excluded. The first periodic review of Next-tier is set for the last business day of October 2028.

JPX says assets in passive funds linked to TOPIX, including ETFs, mutual funds and pension trusts, are “about JPY 160 trillion (as of end of June 2026)”. It notes that TOPIX futures trade at Osaka Exchange and CME.

Why it matters

For index and programme trading desks, the 30 October rebalance is the start of a process, not a one-off. The 683 transitional names will lose weight every quarter until July 2028, unless they pass the 2027 re-evaluation. Passive demand for each name falls step by step, so the selling is spread out and predictable. That should make it easier to absorb, but it gives traders and stock lenders eight quarterly dates to plan around, and index-arbitrage desks a known schedule to position against.

The re-evaluation adds a decision point. A company that lifts its traded value ratio above 0.14 by the August 2027 base date can halt the cuts at half weight. Issuers will have a reason to work on liquidity, and the analysts who model the cuts will need to track it.

TOPIX Next-tier gives the stocks leaving TOPIX a liquid index of their own. Whether product issuers build trackers on it will determine how much passive demand those names keep. Brokers using TOPIX constituent flags for small- and mid-cap coverage, risk models or securities lending should update their reference data, so that transitional names are not treated as full-weight members.

What we are watching

• Whether ETF issuers or asset managers announce products tracking TOPIX Next-tier.
• The second transition step, at the end of January 2027.
• The 2027 re-evaluation, and how many of the 683 issues meet the 0.14 and top-97% criteria.