Which 1989 Japanese asset bubble burst, leading to a prolonged collapse in stocks and property prices?

The Japanese asset bubble that burst and led to a prolonged collapse in stocks and property prices was the Japanese asset price bubble.

During the late 1980s, easy credit, rising land values, and strong investor confidence pushed Japanese equities and real estate to extraordinary levels. The Nikkei 225 reached its historical closing high of 38,915.87 on December 29, 1989.

The Bank of Japan raised interest rates beginning in 1989, and financial conditions tightened. Equity and land prices then fell, leaving banks with large quantities of nonperforming loans and businesses with excessive debt. The market’s long weakness became associated with Japan’s “Lost Decades,” a period of sluggish growth and deflationary pressure.

The phrase “burst in 1989” describes the turning point, but the full economic consequences unfolded over many years. Japan’s stock-market decline was therefore not a single-day crash. It was a prolonged unwinding of interconnected equity, property, credit, and banking excesses.