Company history

Japan's capital market began twice. The Tokyo Stock Exchange took its licence in May 1878 and the Osaka Stock Exchange in June — two cities, each with its own issuers and its own investors, and therefore no particular reason to be one thing. Wartime control swallowed both; in April 1949 they were re-established as membership organizations, and share trading resumed the following month. A membership form answers to its members, and what the members of each city wanted was the neutrality and standing of their market. So the two ran side by side for over 120 years, widening their product ranges in parallel — bonds in 1956, the Second Section in 1961, then government bonds, convertibles and foreign shares in Tokyo through the 1960s and 1970s.

What each exchange could not do was manufacture demand, so both competed by inventing products. Tokyo began publishing TOPIX in July 1969, which became the index foreign investors used to mean “Japan.” Osaka, in the early 1980s, opened a relaxed-listing New Second Section for mid-sized firms shut out of bank credit and equity issuance; its chairman, Yamauchi Hiroshi, judged a Nasdaq-style venture market premature while investor protection and the habit of bearing one's own risk had yet to catch up, and deliberately narrowed the ambition to financing smaller companies. Derivatives were where Osaka bet larger: after Tokyo opened JGB futures in 1985 and both exchanges launched index futures in 1988, Osaka's Nikkei 225 futures were within six months turning over five to six times the cash market. “Osaka's reason to exist,” Yamauchi said, “is to keep being the place where new things are tried.”

Then the floor itself became obsolete. Through the late 1990s processing power and telecommunications made the physical trading floor an expense rather than a market: Tokyo added off-auction trading in 1997 and the TDnet disclosure system in 1998, and in December 1998 Osaka built J-NET, an electronic venue meant to be reachable from anywhere in the world rather than merely competitive at home. Osaka's managing director Noguchi Takuo planned a further non-displayed matching market, OptiMark, to stop large orders leaking into the market and inviting front-running before they were done. In April 1999 Tokyo closed its trading floor and in July Osaka closed its own, ending roughly a century of a market made of voices and hand signals. Both exchanges became, in substance, systems operators — and their principal cost moved to IT.

The last round of competition between the two was over young companies. Tokyo opened Mothers in November 1999; Osaka answered in May 2000 with Nasdaq Japan (renamed Hercules in 2002), built on an alliance with the American exchange. Getting there nearly broke Osaka: in March 2000 it emerged that a vice-chairman seconded from the Ministry of Finance had set up twelve affiliates without board approval and moved funds through them, and pressure from board members drawn from the local brokerage trade forced both chairman and vice-chairman out. Tatsumi Goro took over that June as the first chairman from the private sector in twenty-three years, and reportedly salvaged the collapsing Nasdaq negotiation by telling the room to put down its calculators. In parallel the regional exchanges were absorbed — Hiroshima and Niigata into Tokyo in 2000, Kyoto into Osaka in 2001 — leaving a two-pole national market.

Meanwhile both changed what they legally were. Osaka converted from a membership organization into a joint-stock company in April 2001, Tokyo in November — putting the operators of the market inside the same shareholder-governance frame as the companies they listed, and freeing management from the immediate interests of member brokers. ETFs and REITs followed in 2001, clearing was spun into the Japan Securities Clearing Corporation in 2002, and in August 2007 Tokyo formed a holding company, Tokyo Stock Exchange Group, in preparation for listing itself.

The two-pole structure then produced its final round of one-upmanship. In December 2008 Osaka bought 76.1% of the JASDAQ exchange and merged it in by April 2010, ending the proliferation of competing venture markets on its own terms. Tokyo replied in January 2010 with arrowhead, a cash-equity system that cut order response into milliseconds so that Tokyo could be quoted in the same breath as the major overseas exchanges. Venture markets, matching engines, regional consolidation — three fronts, both sides investing hard, and to a foreign allocator an increasingly unreadable question of which Japanese market to route to.

Consolidation abroad settled the argument. With exchanges merging across borders and the risk that Tokyo would slip out of the running as an Asian financial centre, Tokyo Stock Exchange Group took 66.7% of Osaka Securities Exchange through a tender offer in August 2012, and in January 2013 the two merged and renamed themselves Japan Exchange Group — which listed on the TSE First Section the same day. The surviving legal entity was Osaka. After 135 years apart, the operator of Japan's market had become one company, and a listed one. Saito Atsushi, previously head of the state-backed Industrial Revitalization Corporation of Japan, became the first group CEO and ran the redivision of labour between the two cities.

That redivision was quick and total: in July 2013 Osaka's cash market, clearing and self-regulatory functions moved to Tokyo, and by March 2014 Tokyo's derivatives had moved the other way, with Osaka renamed the Osaka Exchange. Cash in Tokyo, derivatives in Osaka. The group then began using its position as a lever on the companies it listed — the JPX-Nikkei Index 400, launched in January 2014, selected constituents on return on equity and governance, pushing reform from the index side — while planting flags abroad with a stake in founding the Yangon Stock Exchange (18.75%) and a Singapore branch in 2015.

From June 2015 Kiyota Akira, formerly chairman of Daiwa Securities Group, led the group for eight years on an explicit premise: that companies are disciplined by their shareholders. Japan's Corporate Governance Code and Stewardship Code were run in tandem with listing requirements, and the results stabilized — revenue of $1.1B (¥115bn) in the year to March 2016 rising to $1.0B (¥135bn) by March 2022, with profit attributable to owners going from $412.5M (¥45bn) to $380.6M (¥50bn). The other project was completeness: a tender offer took 97.15% of the Tokyo Commodity Exchange in October 2019, precious-metal futures moved to the Osaka Exchange in 2020, and the securities and commodity clearing houses were merged — the “comprehensive exchange” that the 2013 deal had only made possible.

In April 2022 the Tokyo Stock Exchange scrapped the First and Second Section structure it had run since 1961 and replaced it with three segments — Prime, Standard and Growth — screened on liquidity, governance and market capitalization, with continued-listing standards and disclosed improvement plans for companies that fell short. The point was to undo the sheer quantitative bulk of the old First Section, where more than 2,000 companies had accumulated, and to define membership by criteria a foreign institution would recognize. Under Yamaji Hiromi, group CEO from June 2023, making that reform actually bite became the central management task; he treated a falling count of listed companies as neutral in itself, the aim being a market of companies that are listed for a reason.

The other project addresses the operator's own dependence. Revenue rides on daily cash and derivatives turnover, which no exchange can forecast or control, so JPX has been building a second stream that accrues whether or not volumes do: JPX Market Innovation & Research, consolidating the data and digital businesses, began operating in April 2022, and SCRIPTS Asia — transcription of earnings calls and investor meetings — was bought outright in February 2023. The Medium-Term Management Plan 2027, published in March 2025, went further and named a single financial target, ROE of 18% or more, a measure whose denominator management can adjust through capital policy even when trading volumes swing.

The uncomfortable counterpoint arrived in October 2024, when a Tokyo Stock Exchange employee came under investigation by the Securities and Exchange Surveillance Commission on suspicion of insider trading. Yamaji apologized at the results briefing. An institution whose entire programme is to raise the governance standards of the companies it lists had to answer for its own.