Japan’s TSE plans its largest index overhaul, removing firms in the bottom 3% by free-float market cap starting October.
The Tokyo Stock Exchange will remove more than 600 small-cap stocks from its benchmark index in a record reconstitution, targeting companies in the bottom 3% by free-float market capitalization. The phased removal begins in October and spans two years, aiming to improve index liquidity and quality.
Analysts warn the move could pressure smaller issuers, with index-tracking funds pre-positioning and liquidity drying up for borderline firms. Short interest in expected removals may also unwind if market cap shifts push companies back above the threshold.
While the broader index impact is expected to be gradual, individual small-cap stocks face concentrated selling pressure ahead of formal removal dates.