Disclaimer: This content is for informational purposes only, not investment advice. I may own equities mentioned in this article. Investing involves risk, so always do your own research before buying or selling any securities. I own the Yomiuri 333 index via SBI's tracking fund, taking advantage of its 0.132% fee.
If you hold a Japanese index fund, there is a >90% chance your money tracks the Nikkei 225. We need to talk about why Japan’s biggest index is fundamentally broken!
The Nikkei 225 is a “price-weighted” index. That means a company’s influence on the index is dictated entirely by its per-share price. Not its market cap, not its actual revenue or scale. Just the arbitrary price of a single stock.
Wait, seriously?
Yes, and that means that a company like Fast Retailing, the parent company of Uniqlo, commands roughly 10% of the entire Nikkei 225 for no other reason than the fact that its share price is sky-high. Toyota is more than three times larger than Fast Retailing in actual market value, but it has only a fraction of the influence just because its individual shares cost less. It is absolute absurdity.
And until recently, your only other real option is the TOPIX index. But the TOPIX is so ridiculously broad, covering over 1,600 companies, that you are forced to buy into all the stagnant, low-liquidity shit companies right alongside the actual market leaders.
But now, we FINALLY have an alternative:
The Yomiuri 333: It screens for the 500 most liquid stocks, grabs the 333 largest by market cap, and assigns them an exact equal weight of roughly 0.3% each. You completely bypass the price distortions of the Nikkei, and you cut out the bloated garbage of the TOPIX.
It works so well that the Japanese government has already approved it for the tax-exempt NISA program, including the notoriously strict “Tsumitate” (accumulation) NISA framework, which is heavily gatekept.
Why does the Yomiuri 333 exist?
The most unusual aspect of the Yomiuri 333 is its creator: The Yomiuri Shimbun, Japan’s largest newspaper publisher. It is rare for a media company, rather than a traditional financial exchange or specialized index provider, to launch a benchmark market index. The newspaper partnered with Nomura Fiduciary Research & Consulting to develop and calculate the index.
The Yomiuri Shimbun created this index as a “third perspective” as late as last year, officially launching it on March 24, 2025. The aim is to help the public better understand market movements that traditional indices might miss, and to encourage retail investment under Japan’s expanded NISA (Nippon Individual Savings Account) tax-exemption program.
Even the number “333” has a quirky origin. While the developers wanted a number that covered a meaningful portion of the market and ensured sufficient trading liquidity, they ultimately settled on exactly 333 constituent companies because the name “Yomiuri 333” simply has a “nice rhythm” and is easy for the general public to remember.
Why Yomiuri 333 is super interesting
The Yomiuri 333 offers several distinct structural advantages:
True Diversification: Because every company is weighted at 0.3%, the top 10 stocks make up less than 4% of the index, effectively neutralizing the concentration risks found in the Nikkei 225 and TOPIX.
Built-in Contrarian Strategy: To maintain an equal weight, the index must be rebalanced quarterly. This creates a mechanical “buy low, sell high” effect. During rebalancing, stocks that have surged in price are trimmed back to 0.3%, and stocks that have dropped are bought up to reach 0.3%.
Regional Economy Exposure: While the Nikkei 225 is heavily biased toward Tokyo-centric conglomerates, the Yomiuri 333 specifically captures Japan’s broader regional economy. Of its 333 constituents, 119 are headquartered outside of Tokyo, giving investors unique exposure to mid-sized regional champions.
Risk-Adjusted Performance: Quantitative analysis has shown that during certain measured periods, the Yomiuri 333 exhibited lower volatility (standard deviation) and a better Sharpe ratio (risk-adjusted return) than both the Nikkei 225 and TOPIX.
Why Yomiuri might not be for everyone
Despite its clever design, the Yomiuri 333 has a few notable drawbacks:
High Rebalancing Costs: The equal-weight methodology requires constant maintenance. Selling winners and buying losers four times a year to reset 333 stocks generates higher transaction and operational costs for mutual funds and ETFs tracking the index, which can slowly eat into an investor’s long-term returns. However, from my quick research, the difference between a Yomiuri 333 index fund and a regular Nikkei 225 index fund is as little as 0.02%.
Lagging During Mega-Cap Rallies: If the Japanese stock market experiences a massive bull run driven entirely by a few giant semiconductor or tech companies, the Yomiuri 333 will naturally underperform the Nikkei 225 and TOPIX because its exposure to those specific giants is intentionally diluted.
Style Bias: The Nikkei 225 leans heavily toward large-cap growth stocks, which often dominate modern bull markets. The Yomiuri 333, by contrast, has a distinct structural tilt toward mid-cap and small-cap value stocks. If the market cycle heavily favors large-cap growth, the Yomiuri 333 will structurally fall behind.