Below is a Nikkei Return calculator with dividend reinvestment, a necessary (yet rarely seen) feature to compare true investment returns. The return calculator can also factor in the Japanese CPI index to adjust returns for inflation. By default, return estimates are quoted in yen, but the tool *also* allows adjustment for the yen/dollar exchange rate as well as the United States CPI index to check returns from an American investor’s perspective.

This Nikkei return calculator has *monthly* resolution and our data starts in January of 1950*.*

*Editor: August is 8/10 Close*

**The Nikkei-225 Dividends Reinvested Price Calculator (With Inflation Adjustment and Dollar Exchange Rate)**

*For a complete list of all our calculators, for investing and otherwise, go to this page. Most popularly, we have a S&P 500 Return Calculator as well as a Dow Jones Industrial Average return calculator… both with reinvested dividends. There is also a stock reinvestment calculator for the US and Canada.*

The Nikkei 225 is a price weighted index much like the American Dow Jones Industrial Average although it has more diversification (with 225 issues to the DJIA’s 30). The index is owned by the Nikkei newspaper, formally *The Nihon Keizai Shimbun (日本経済新聞)*. It has been calculated daily since late 1950, but when created it was back-calculated to mid-1949.

Like our other calculators, our goal with this tool is to produce a “fairer” view of index returns.

Although this calculator leaves out any estimates of taxes and fees and other investment expenses, it *includes estimated monthly dividend payments*, as well as estimates for the yen/dollar exchange rate and inflation indices (CPI) for both Japan and the United States. This allows you to estimate the index’s real return for a domestic or international investor – or both. There are two sections, toggled by the radio buttons for ‘**Show Returns in Yen**‘ or ‘**Show Returns in Dollars**‘:

#### Nikkei Return Calculator: Show Returns in Yen

**Total Nikkei-225 Return**– The total price return of the Nikkei. This would be 0 if the price was 100 at the start and end date.**Annualized Nikkei-225 Return**– The annualized price return of the Nikkei-225, if the above number was equally spread out over years.**Total Nikkei-225 Return (Dividends Reinvested)**– Assuming dividends were reinvested, an estimate of the total percentage return.**Annualized Nikkei-225 Return (Dividends Reinvested)**– Annualized return (geometric mean) of the above total Nikkei-225 return estimate.**Inflation Adjusted (Japan CPI)? –**A reminder whether the currently displayed numbers are factoring in Japan’s CPI index for inflation.

#### Nikkei Return Calculator: Show Returns in Dollars

**Total Nikkei-225 Return (Dollars)**– The total price return of the Nikkei once converted to dollars.**Annualized Nikkei-225 Return (Dollars)**– The annualized price return of the Nikkei-225 once converted to dollars.**Total Nikkei-225 Return (Dividends Reinvested, Dollars)**– Estimated total Nikkei-225 return with dividends reinvested, once converted to dollars.**Annualized Nikkei-225 Return (Dividends Reinvested, Dollars)**– Geometric average return of the annualized number calculated above.**Inflation Adjusted (Japan CPI)? –**A reminder whether the currently displayed numbers are factoring in the United State’s CPI index for inflation.

**Caveats and Methodological Choices for the Nikkei Return Calculator**

This calculator is meant solely for research and scholarship purposes. *It gives no exact daily values*, nor could we expect it to – it attempts to estimate the return of average investors who bought during the starting month then sold during the ending month – no more and no less. It should give a reasonable guess, however, to investor performance ignoring fees and taxes. **Please verify all results on your own**; we accept no responsibility for investment decisions made due to this tool.

As with all of our dividend reinvestment calculators, we’ve put a lot of work into the initial research for this Nikkei return calculator and weighed the tradeoffs and pros and cons of many different inputs. **Most importantly:** this calculator has a monthly resolution, and any internal numbers in the tool ** do not map into an individual date**.

That means any questions such as ‘which day’s closing price was January 1952?’ **don’t have an answer**.

Internal to the tool are *averages of closing prices*, which means the best way to do a ‘yearly’ estimate of return is to look at, say, a “December to December” or “January to January” closing period. Do not ask me how many days that is… it’s the average closing price.

We’re making lots of assumptions, so I can’t entertain “well what if I only bought on the third Monday?” type questions – please go to Nikkei directly for that data and I will make a link from DQYDJ to your calculator when you build it.

**Sources for the Nikkei Return Calculator**

#### Nikkei-225 Index

- Nikkei Index Main Page
- FRED’s Nikkei-225 Archives (Use monthly/average)

#### Nikkei-225 Dividends

- Mason, A.J., “OpenSolver – An Open Source Add-in to Solve Linear and Integer Progammes in Excel”, Operations Research Proceedings 2011, eds. Klatte, Diethard, Lüthi, Hans-Jakob, Schmedders, Karl, Springer Berlin Heidelberg

pp 401-406, 2012, http://dx.doi.org/10.1007/978-3-642-29210-1_64, http://opensolver.org - Kazuo Udea, University of Tokyo
- Mike Kennedy, Angel Palerm, Charles Pigott and Flavia Terribile for the OECD
- Legg Mason Newsletter
- Michael D. Bordo, Rutgers University
- Statistics Japan
- Nikkei Total Return Factsheet
- Nikkei Total Return Index
- Notes:
- At some points we use dividend estimates on the Japanese TOPIX Index owned by the Japan Exchange Group, or alternatively datasets labeled as ‘Japanese Dividends’.
**We believe them to be close to what we are looking for, but perhaps not exact. If this bothers you, you will need to calculate returns on your own.**

- When we have overlapping dividend estimates for various months, we used the harmonic mean to estimate the true TTM dividend. To convert TTM dividends to estimated monthly payouts, we used a non-linear programmer in OpenSolver, as listed above, and minimized the sum of errors from the implied TTM.

- At some points we use dividend estimates on the Japanese TOPIX Index owned by the Japan Exchange Group, or alternatively datasets labeled as ‘Japanese Dividends’.

**Inflation & Exchange Rates**

- Statistics Bureau Japan
- US CPI is from Robert Shiller’s Spreadsheet
- FRED
- Notes:
- The exchange rate was 360 yen/dollar through 1971
- Where data isn’t available in the most recent months, we extrapolate by ‘dragging (cell expansion)’ the previous 2 months forward using Google Docs.

**Implications**

If you’ve been a long time reader (thank you), we don’t need to explain why dividends are important – they make a huge difference over longer time periods such as a ‘typical’ 40 year career.

Let’s illustrate this phenomenon from May 1976 – May 2016 (the first month of this calculator) adjusted for inflation (*and in yen returns, not dollars*; we’re assuming a domestic worker):

- A total return of ~106% if you ignore the effect of dividends
- A total return of ~242% if you include dividends

That’s the difference between a 1.8% real and a 3.1% real return – a huge compounding difference.

Turning off the inflation adjustment, you find that dividends are credited to almost half the overall return – something like 480% versus 250% if you only count price returns.

Again, that’s way too much to ignore – so when you look at performance numbers, especially over longer time periods, you should always seek out dividend adjusted numbers. That’s what we tried to deliver with the Nikkei return calculator… and we hope you enjoy it.

*Please let us know if you see any bugs or issues in the calculator – we’ll note any issues we do find, but we expect that it’s in reasonable shape for today. *

Justus Pendleton says

I’m having trouble reconciling some of your numbers. I’m hoping you help sort me out 🙂

When I look at, say, 1952 it says

130.114% for the annualised return and

153.477% with dividends reinvested, which works out to ~23% dividends

Both numbers seemed really high so I tried to find out where they come from.

http://www.stat.go.jp/english/data/chouki/14.htm in “14-25 -a” lists the yields of the Tokyo Stock Exchange. For “”Average yield of dividend paying corporations (%)” in 1952 they give 9.85% which seems far off from the 23% implied above.

Similarly when I look at FRED’s data for the Nikkei 225 in 1952: https://fred.stlouisfed.org/graph/?g=cE6x

it looks like the index went from 167.80 on January 4, 1952, up to 363.91 on December 26, 1952. That’s close to the 130% from the calculator but still a bit different.

Any ideas why I’m seeing different numbers than the calculator?

Thanks!

PK says

We won’t be able to reconcile the numbers exactly, the exact number and timings are lost to history (at least to this engineer in California). Also please note our caveat again that the numbers internal to the calculator are not from individual dates; to get to monthly resolution we average closing prices of each month.

Checking the numbers in the tool, I have 9.72% dividends from Feb ’52 – Jan ’53 using straight addition. The disparity comes from when the additional dividend shares are purchased. If you started with ‘1’ share in Jan ’52, it’d be worth 179.05. In Jan ’53, you’d have 1.1015 (and change) shares at 412.2 each, or 453.85 (and change). That’s where the 153% comes from, 2.5347x (and change) the initial investment.

So you won’t be able to square the differences in each month, the numbers are based on the fantasy of monthly averages plus assumed dividend timings. Best you’ll be able to do is come into the ballpark. If you use individual dates and better scholarship your numbers will beat the tool’s; the fairest statement in the post is “[i]t should give a reasonable guess”. Hope this helps.