Japan’s 1990s stock-market collapse and prolonged stagnation became known as the Lost Decade.
Japan’s asset-price bubble reached its peak around 1989. The Nikkei 225 closed at an all-time high of 38,915.87 on December 29, 1989. After the bubble burst, share prices and land values fell, leaving banks with large volumes of nonperforming loans and weakening corporate balance sheets.
The downturn was not a single trading-day crash. It developed through years of falling asset prices, weak demand, banking difficulties, and deflationary pressure. Japan’s economy grew slowly during much of the 1990s, and the Nikkei remained far below its 1989 peak for decades.
“Lost Decade” originally referred mainly to the 1990s, although economists sometimes use “Lost Decades” for Japan’s broader stagnation into the 2000s and 2010s. The term does not mean that every year had negative growth; it describes prolonged underperformance after the bubble.