The Nikkei 225 Stock Average, left, and the Topix Index displayed outside a securities firm in Tokyo | bloomberg

Hedge fund traders are jostling for a slice of the action in Japan this week as the biggest-ever rebalancing of the Topix equity benchmark comes into effect.

A reshuffle impacting more than 700 stocks is expected to trigger around $60 billion of passive trading at Thursday’s close, driven by investors like exchange-traded funds that adjust their portfolios to track the index.

The index rebalancing — the latest step in a yearslong effort by Japan Exchange Group to make the Topix more investable — will kick off on Friday and be implemented across eight quarterly phases through mid-2028. The shakeup includes deletions, additions and free-float weight adjustments.…