Which 1989 event caused a sudden crash in Japan’s stock market?

The collapse of Japan’s asset-price bubble caused the country’s sudden stock-market crash at the start of the 1990s.

Japanese share and land prices had risen dramatically during the second half of the 1980s. Easy credit, optimistic expectations, and intense speculation pushed valuations to levels that proved unsustainable. The Bank of Japan raised interest rates beginning in 1989, helping end the boom.

The Nikkei 225 reached its record closing high of 38,915.87 on December 29, 1989. It then fell sharply as investors reassessed corporate profits, property values, and the health of banks. The resulting period of stagnation is commonly called Japan’s “Lost Decades.”

The phrase “bubble collapse” describes the cause, not one single trading day. Japan’s property market also weakened severely, leaving banks with bad loans and slowing recovery. The episode remains a major example of how credit-fueled asset inflation can damage an economy after prices reverse.