The Tokyo Stock Exchange has made a significant move by extending its trading hours for the first time in 70 years. This change, implemented smoothly on its first day, adds 30 minutes to the trading day, now operating from 9 a.m. to 3:30 p.m. with an hour break for lunch. The decision aims to enhance the market’s appeal to foreign investors and increase trading activity, according to Japan Exchange Group Inc., the parent company of the exchange.
Although the extension marks a historic shift, its immediate impact on trading activity remains uncertain, as analysts point out. The trading volume on the Prime Market slightly dipped on the first day of the extended hours compared to the previous trading day. This move follows in the footsteps of the Korea Exchange, which extended its closing time in 2016, albeit without a significant boost in trading volume initially.
The Tokyo Stock Exchange’s decision to lengthen trading hours also serves a practical purpose. The extended hours provide investors with more flexibility in case of unexpected events like system failures. A previous system glitch in 2020 that led to a full-day shutdown sparked discussions about the need for longer trading hours to mitigate the impact of such incidents on trading activities.
Despite the extension, the Tokyo Stock Exchange still trails behind major global exchanges like the New York Stock Exchange and the London Stock Exchange in terms of trading hours. The introduction of a new “closing auction” system accompanies the extended hours, allowing for more orderly determination of closing prices in the final minutes of trading.
Market experts have weighed in on the potential effects of the extended trading hours. Masahiro Ichikawa, Chief Market Strategist at Sumitomo Mitsui DS Asset Management Co., believes the move could attract more overseas investors, particularly from other Asian markets. Makoto Sengoku, Senior Equity Market Analyst at Tokai Tokyo Intelligence Laboratory Co., commended the exchange’s efforts to enhance market attractiveness and corporate value, emphasizing the importance of demonstrating Japan’s market appeal through sustained growth.
The Tokyo Stock Exchange’s decision to extend trading hours reflects broader trends in global financial markets, where exchanges seek to adapt to evolving investor needs and market dynamics. By providing investors with more time for trading and introducing new mechanisms like the closing auction system, the exchange aims to foster a more vibrant and resilient marketplace.
