Japan’s Nikkei 225 closed at 38,915.87 on December 29, 1989, its record peak before the asset-price crash.
The late-1980s Japanese bubble involved rapidly rising stock and land prices, easy credit, optimistic expectations, and intense speculation. The Nikkei’s closing peak came on the final trading day of 1989, after the index had multiplied several times during the decade.
The boom reversed in the early 1990s. Japanese stock prices fell sharply, and property values also declined. Banks were left with large quantities of nonperforming loans, while corporations and households faced weaker balance sheets. The prolonged economic consequences are commonly associated with Japan’s “Lost Decades,” although the precise period covered by that phrase varies.
The Nikkei did not immediately recover its 1989 closing high. Its long decline illustrates why a market peak and a market low are different facts: the peak was recorded in December 1989, while the index’s major trough came later. The 1989 peak is often compared with Japan’s 1990s real-estate and banking crises, but it should not be confused with the 1987 global crash.