The Nikkei 225 is a stock market index for the Tokyo Stock Exchange (TSE). It is calculated daily by the Nihon Keizai Shimbun (Nikkei) newspaper. The Nikkei was first calculated in 1950 and is the most widely quoted average of Japanese stocks.
It is similar to the US’ Dow Jones Index in that it is a price-weighted index so companies with higher share prices receive a larger weighting when determining the value of the index. It was in fact called the Nikkei Dow Jones Stock Average from 1975 to 1985.
The Nikkei measures the performance of 225 large, publicly-owned companies in Japan from a wide array of industry sectors. It therefore maps the performance of the Japanese economy and is an indicator of investor sentiment towards Japanese equities.