MarketGrader Featured Index:
MarketGrader Japan Core Indexes (Large & Small Cap)
Capturing Japan’s Reawakening Through Fundamentals-First Indexing
The Challenge: Outdated Narratives and Inadequate Benchmarks
For decades, Japan was viewed by global investors as a stagnant market—hampered by weak corporate governance, excessive leverage, and cross-holdings that obscured transparency and hindered value creation. Many traditional indexes reflected this reality, overweighting legacy giants and underrepresenting quality innovation.
But in recent years, Japan’s corporate sector has undergone a quiet transformation. Structural reforms, market modernization, and governance improvements have pushed many companies to refocus on shareholder returns, capital efficiency, and global competitiveness.
Japan’s story has changed—yet the benchmarks used to track it haven’t.
The MarketGrader Approach: Rethinking Japan with GARP + Quality
The MarketGrader Japan Core Indexes offer investors a smarter lens for accessing Japan’s evolving equity opportunity. Using our 24-variable GARP + Quality methodology, we surface the most fundamentally sound companies in Japan’s large- and small-cap universes—those positioned to deliver innovation and economic value across cycles.
Japan at a glance:
- 3rd largest economy globally by nominal GDP (approx. $4.2T USD)
- Home to over 3,800 publicly traded companies
- Represents a significant slice of global developed equity markets—yet is often underweighted due to legacy bias in benchmarks
How the Indexes Work
| Index | Selection Universe | Construction Approach |
| Japan Large Cap Core | Top ~85% of Japan’s total market cap | Selects 100 highest-rated large caps based on MarketGrader score |
| Japan Small Cap Core | Bottom ~15% by market cap | Selects 200 highest-rated small caps based on same methodology |
Both indexes:
- Apply liquidity filters and sector balance constraints
- Rebalance semiannually to reflect new fundamentals
- Eliminate companies with grades below 50 (on a 100-point scale)
What Makes These Indexes Different
| Traditional Japan Indexes | MarketGrader Japan Core Indexes |
| Cap-weighted, top-heavy exposure | Equal-opportunity selection based on fundamentals |
| May overweight financials or legacy firms | Seeks capital-efficient, innovation-led growth companies |
| Lacks sector and size diversification | Separate large and small cap indexes for targeted exposure |
| Passive exposure to yesterday’s Japan | Actively identifies the companies shaping tomorrow’s economy |
The Outcome: Exposure with Purpose
As Japan repositions itself on the global stage—led by cutting-edge technology, global brands, and shareholder-aware governance—investors need tools that reflect this evolution.
The MarketGrader Japan Core Indexes offer:
- Fundamentals-first access to Japan’s growth compounders
- Smarter core allocations across cap segments
Alternative benchmarking for regional or global equity strategies
