Masayoshi Son has come to dominate Silicon Valley. Now his company is increasingly dominating Japan’s markets, with SoftBank Group Corp. rising to become the largest-weighted stock on the country’s Topix index.

SoftBank pulled ahead of Toyota Motor Corp. to put itself in pole position on the benchmark gauge last week, and sat as the highest weighting, albeit by a fraction, as of market close on Wednesday. That’s ended an almost 13-year streak for the automaker as the largest stock on the index, according to data compiled by Bloomberg.

The change is further evidence of SoftBank’s own winning run. While Toyota trades are little changed in 2021, SoftBank stock is up nearly 30%, rallying past a two-decade record to a new high, backed by a surging stock market that has lifted the value of its portfolio companies.

Toyota, meanwhile, has been impacted by production outages due to earthquakes in Japan and freezing temperatures in the United States, concerns over a global semiconductor shortage and fears it’s losing out in the red-hot electric vehicle market.

"It’s good news for the Japanese equity market, which has traditionally been dominated by manufacturers that have very low valuation,” said Mitsushige Akino, a senior executive officer at Ichiyoshi Asset Management Co. "If Toyota continued to remain the top weight, then there’s limit to how high the index can go. It’s a historic turning point.”

Shares of SoftBank rose 2.1% on Wednesday, beating a 0.5% gain in the Topix gauge and a 0.6% advance in Toyota’s stock.

Another reason for SoftBank’s dominance is the makeup of the Topix. The index is weighted by market value, where Toyota still dominates. But that value is adjusted by a "free-float weight ratio,” based on the number of shares actually available to be traded in the market. The opaque measurement ignores stock that’s locked up by major shareholders, treasury stock or cross-shareholdings held by units or firms with business dealings.

A recent review in January trimmed Toyota’s ratio to 50% from more than 55%, with Keiichi Ito, chief quants analyst at SMBC Nikko Securities Inc., noting that Toyota is impacted by its vast series of cross-shareholdings. SoftBank has a ratio of 60%.

SoftBank’s dominance in Japan’s markets is becoming more pronounced. It’s the second-largest weighting on the 225-issue Nikkei average on the Tokyo Stock Exchange after Fast Retailing Co., as well as the second most valuable company in the country by market value.

"Changing times demand different companies,” said Ito.

With Toyota having lost its crown as the world’s most valuable automaker to Tesla Inc. last summer, it may soon discover that SoftBank also outranks it in Japan too. While SoftBank’s market value trails Toyota’s ¥25.9 trillion valuation by around ¥4 trillion, that gap has narrowed by more than two-thirds in the past year.

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