Just to concur, the indicator will turn
only with the crown in the "0" position.
All Seiko models with an internal rotating index ring have the special stem with the square section to hold the indicator wheel (gear), the indicator wheel and the spring.
There are four distinct versions of this arrangement and the hard parts are NOT interchangeable. One can, however, fudge the springs.
The gear on the stem is held by the spring so it contacts the indicator gear track when the stem is in it's "0" position. When the stem is pulled out to its "1" position for setting the hands, the gear is pulled away from the indicator so its position will not change while the time is being set.
The reason for this somewhat elaborate detail is to prevent the gear from damaging the plastic gear track of the indicator when the stem is inserted to the movement. The spring allows the gear to slide back from the track during insertion, then snap into its correct position as the stem turns hits home.
Here's part of a note to one of my customers regarding why the indicator in his 6110-6106 blue "sushi" would not operate. This was truly vexing and
proved the parts will NOT interchange...
"Why your stem was incorrect is a matter of speculation, of course, but I imagine the original may have broken or the whole stem set, stem, crown, gear and spring went missing as sometimes happens. Whomever did the repair picked a stem meant for another model whose diameter is slightly larger than this one by what turned out to be 0.30mm, not my eyeball guess of 0.15mm.
Here's a drawing I did to show what the stems look like and how they differ at that center portion...
end quote
The incorrect stem held the indicator wheel just a hair away from the indicator's gear track. This was very fortunate because incorrect parts in the stem set can and, far more often than I would like to see, damage the indicator's gear track which cannot be repaired.