Which 1989 Japanese financial bubble burst and helped begin the prolonged market collapse known as the Lost Decades?

The Japanese asset price bubble was the financial bubble that burst around 1989 and helped begin the prolonged market collapse known as the Lost Decades.

Japanese stocks and real-estate prices rose dramatically during the second half of the 1980s. Easy credit, optimistic expectations, and heavy lending helped push valuations to extraordinary levels. The Nikkei 225 reached its peak at 38,915.87 on December 29, 1989.

The Bank of Japan later tightened monetary policy, and asset prices began falling. The Nikkei lost much of its value during the 1990s, while banks struggled with bad loans and companies reduced investment. Weak growth and deflation persisted for much of the following period.

The phrase “Lost Decades” is broader than the stock-market crash and refers to Japan’s prolonged economic stagnation. The bubble also affected land and property prices, so calling it only a stock bubble leaves out an important part of the episode.