The nickname “Lost Decade” was given to Japan’s prolonged economic stagnation after its late-1980s asset-price bubble burst. Japan’s stock and property markets had risen to extraordinary levels before the Nikkei 225 reached its peak at the end of 1989.
The Nikkei 225 closed at 38,915.87 on December 29, 1989. It then entered a long decline, while falling land prices weakened banks, companies, and household balance sheets. Nonperforming loans remained a major problem, and hesitant policy responses contributed to a slow recovery.
Although the phrase originally described the 1990s, “Lost Decades” is now often used for Japan’s broader period of weak growth and deflation extending into the 2000s. The term therefore describes an extended economic era, not one isolated trading day.
Japan’s experience is frequently cited as a warning about speculative bubbles. A collapse in asset values can damage the banking system and suppress spending for years, even after emergency interest-rate cuts and other stimulus measures.