The Nikkei 225 reached its peak before Japan’s asset-price crash. The index closed at 38,915.87 on December 29, 1989, after a long rise fueled by expanding credit, rising property values, and strong investor confidence.
The Nikkei 225 is a price-weighted index of 225 leading companies listed on the Tokyo Stock Exchange’s Prime Market. Because it is price-weighted, companies with higher share prices have greater influence than companies with larger total market capitalizations. This differs from many capitalization-weighted indexes.
After the 1989 peak, Japanese equities began a long and uneven decline. The collapse was tied to the bursting of a broader asset bubble involving stocks and real estate. Banks carried troubled loans, businesses reduced investment, and the economy entered a period of weak growth and financial repair.
The index’s 1989 record stood for decades and became a symbol of the scale of Japan’s boom. A high stock-market index alone did not cause the crash; it reflected the combination of monetary conditions, land speculation, leverage, and expectations that had become difficult to sustain.