# Tokyo's Stock Index Is About to Drop Nearly Seven Hundred Companies > Japan Exchange Group unveiled the largest overhaul in TOPIX history, earmarking 683 companies for removal under tougher liquidity rules in a push to turn one of the world's most bloated benchmarks into something investors actually want to track. - Source: Morning Sun - Canonical URL: https://morningsun.jpn.com/article/tokyo-s-stock-index-is-about-to-drop-nearly-seven-hundred-companies - Author: Morning Sun Editorial - Section: Markets - Published: 2026-10-07T10:39:17.598Z - Updated: 2026-10-07T10:39:17.598Z - Tags: TOPIX, Japan Exchange Group, Japan, Stock Market, Tokyo Stock Exchange, Index, Equities, Markets --- Japan Exchange Group unveiled the largest reshuffle in the history of the TOPIX on Wednesday, earmarking six hundred eighty three companies for removal from a benchmark that has long carried a reputation as one of the most crowded and least selective major stock indexes in the world. The changes begin taking effect on October 30, kicking off a multiyear process that will ultimately leave TOPIX looking nothing like the sprawling index investors have tracked for decades. At the center of the overhaul is a new, tougher standard for staying in the index at all. Existing constituents must now rank within the top ninety seven percent of cumulative free float market capitalization to remain included, a bar that roughly seven hundred of today's names are not expected to clear. Even companies listed on the Tokyo Stock Exchange's Prime market, ordinarily considered the top tier of Japanese equities, are not automatically shielded from exclusion if their free float liquidity falls short of the new threshold. ## Trading bloat for credibility TOPIX has stood out among major global benchmarks for years precisely because of how many companies it includes, a legacy of index design choices that prioritized broad market representation over investability. That approach left the index stuffed with hundreds of relatively illiquid small cap stocks, names that technically belonged to the Japanese equity market but traded thinly enough to create real friction for the large passive funds that track the benchmark and need to be able to buy and sell positions without moving the market. This reshuffle marks the second stage of a multiyear effort by Japan Exchange Group to fix that problem, continuing a push to make TOPIX a cleaner, more genuinely investable benchmark rather than simply the broadest possible snapshot of listed Japanese companies. The final phase of the process is expected to narrow the index down to roughly nine hundred eighty names by July 2028, a dramatic reduction from where the constituent count stands today. ## New entrants alongside the cuts The overhaul is not purely subtractive. Thirty five companies are being added to the index as part of the same reshuffle, including McDonald's Holdings Japan and Ferrotec, names whose free float liquidity profile fits comfortably within the index's new, stricter criteria. Their addition underscores that the point of the exercise is not simply to shrink TOPIX for its own sake, but to replace index bloat with constituents that better reflect how investors actually trade Japanese equities today. ## A fresh incentive for companies to clean up their share structure For companies facing potential removal, the reshuffle adds real pressure to address whatever is holding back their free float liquidity, whether that means unwinding cross shareholdings, encouraging more active trading of their shares, or otherwise working to meet a standard that increasingly treats liquidity, not just a listing on a prestigious exchange tier, as the price of admission to one of Japan's most closely watched indexes. Losing inclusion carries real financial consequences, since passive funds tracking TOPIX will simply stop holding a stock that no longer qualifies, regardless of the company's underlying business quality. With the first wave of changes landing at the end of October and further phases stretching out to 2028, Japanese companies on the bubble have a defined runway to make the kind of structural changes that could keep them inside the index, or to accept that being dropped from TOPIX is now a real possibility rather than a remote, theoretical risk. --- Originally published by Morning Sun. Free to cite with attribution and a link to https://morningsun.jpn.com/article/tokyo-s-stock-index-is-about-to-drop-nearly-seven-hundred-companies.