One of the first things anyone working on a XJ (or any other bike) should get is a torque wrench. Not just any wrench will do; indeed you will need two wrenches if you need to open up the motor.
Half inch drive, foot pounds:
The first torque wrench is a general type, like you would use on a car. The half inch drive torque wrench is used on larger bolts. These wrenches are generally designed to be used in the 15 to 150 foot pound range.
Used on: axles, head studs, frame mounts etc.
Three eight drive, inch pounds:
This torque wrench is the one to invest in if you work on engine internals. The force required inside the motor is often far less than 15 foot pounds and settings for these parts are given very precisely in the manual. The range these wrenches are normally used on the XJ is from 30 to 180 inch pounds. The more accurate the wrench, the more they cost. Borrow a known good one if you cannot afford to buy one.
Do not attempt to do
any engine work if you do not have a good inch pound torque wrench.
Must be used on: any engine work!, oil filter cover, oil drain plug, clutch bolts.
Allen keys:
Buy good quality metric Allen keys. You need a size 4, 5 and 8 mm key. These can also be found in a three eight drive version for use with a torque wrench.
Used on: engine cases, valve cover, passenger foot rests, ignition rotor.
Socket set:
Half inch drive for the larger bolts and three eights for the smaller ones

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Don't buy a cheap no name socket set. Just don't!
OK saying that you do not need to spend a fortune either. I have found Fuller to be inexpensive. The XJ uses metric fittings, thus you need metric sockets. Sockets are used with the torque wrench.
Used on: almost everything.
Ring (box)/open spanners:
Metric once again! Cheap ones work but good spanners are normally thiner making them easier to get on hard to reach bolts and a better fit on the bolt head. I double up on common sizes, can be handy and you need 2 x 12 mm open spanners for clutch cable adjustment. My spanners are a mix of different brands so I know at a glance which size they are

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Used on: items like clutch and break pivot bolts, clutch cable adjustment, body work, anything a socket can not be used on.
Screw drivers:
Well fitting, no broken or worn tips. They are
not a punch or a chisel and thus should never be used as such! You will need a number 2 and a number 3 Phillips tip. A rubbish or incorrect size Phillips screw driver will only "drill out" a Phillips head screw. Some grinding paste on the tip can help to stop it slipping. The screws on the crank end covers are number 3 Phillips.
Flat bladed screw drivers are used on the carburetors. Make sure they are a very good fit for mixture adjustment screws. For the jets inside the carburetors you are best to use cabinet makers flat blades. They do not taper out in size on the blade like normal flat blades do and fit the slots in the jets properly.
Used on: body work, bar controls, carburetors.
Others:
Some other tools that are handy are:
linesman pliers,
side (wire) cutters, for installing your new fuse box.
vice grips, unjamming your transmission when a piece of primary chain guide has jammed it.
goose necks,
hammers, normal and soft plastic.
impact driver, the tool that your hammer should hit.
punches and drifts, don't use your screw drivers!
feeler gauges, valve clearances, spark plug gap, bench syncing carburetors.
test lamp, make sure power is getting where it should (Make your own).
multi meter,
soldering iron, installing your new fuse box. Any connections you make I advise soldering not clamping.
General tools most will have anyway.
Specials:
Air Compressor.
Rattle gun (get the clutch basket off the bike!).
Carburetor sync tool. Make your own, clear tube and some 2 stroke oil is all it takes.
YCIS tool. Make your own, biggest thing to note is the sealing part needs to be able to handle high temperatures. Or jam some marvel mystery oil soaked clothes line in there!
Valve clamp. Make your own, G clamp and tube with hole cut in the side to remove the collects through.
Order to use:
First choice a socket,
next a ring spanner,
then a open ender,
then (desperate) a shifter (nut f***er),
then vice grips (oh bugger someone rounded the bolt head with the shifter),
then if you are using a Stiltson (pipe) wrench that is one heck of a bolt!
Hope this can be of help to others. Feel free to add or correct

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