TOKYO, Nov 6 (Reuters) - The Tokyo Stock Exchange is launching a new index comprised of companies with high return on equity and strong corporate governance to appeal to investors, amid a strong rally in Japanese shares this year.
It is the first time that the Tokyo Stock Exchange, part of Japan Exchange Group Inc, and Nikkei Inc, publisher and index compiler for the benchmark Nikkei share average, are jointly developing a new equity index.
The index will consist of 400 companies, including blue chips Toyota Motor Corp and mobile operator SoftBank Corp as well as small caps, and will begin operation from the start of next year, they said in a statement on Wednesday.
"The new index will promote the appeal of Japanese corporations domestically and abroad, while encouraging continued improvement of corporate value, thereby aiming to revitalise the Japanese stock market," they said.
Driven by the government's fiscal and monetary expansionary policies, the Nikkei index has risen 38 percent so far this year in local currency terms, outpacing a 24 percent rise in the U.S. S&P 500 and a 14 percent gain in the pan-European FTSEurofirst 300.
Foreign investors ploughed in 10.4 trillion yen ($105.5 billion) in the first nine months of this year, compared with a net outflow of 131.9 billion yen over the same period last year, according to the Ministry of Finance.
Among the companies in the new index, JPX-Nikkei Index 400, are Honda Motor Co Ltd, mobile operator NTT DoCoMo , Canon Inc, Sony Corp, lender Mitsubishi UFJ Financial Group, brokerage Nomura Holdings, drugmakers Takeda Pharmaceutical Co Ltd and Astella Pharma Inc and Fast Retailing Co Ltd, owner of Uniqlo clothing chain.
For more details and the full list of the index constituents, please click on: http://www.tse.or.jp/english/news/17/131106tb.html
($1 = 98.5450 Japanese yen)
(Reporting by Dominic Lau; Editing by Kim Coghill)