The Nikkei 225 was Japan’s stock-market index whose 1989 peak preceded a historic collapse.
The index reached an all-time closing high of 38,915.87 on December 29, 1989, near the end of Japan’s asset-price bubble. Japanese shares and land had risen dramatically during the 1980s, supported by easy credit, speculation, and optimistic expectations about the economy.
After monetary policy tightened and the bubble burst, Japanese equities fell for years. The Nikkei lost more than half its value during the early 1990s and did not regain its 1989 closing peak for decades. The prolonged weakness became closely associated with Japan’s “lost decades.”
The Nikkei 225 should not be confused with TOPIX, another important Japanese equity index. The Nikkei is price-weighted and consists of 225 major companies listed on the Tokyo Stock Exchange’s Prime Market, while TOPIX is capitalization-weighted.