Japan experienced the 1989 stock-market crash that helped begin its “Lost Decades.”
Japan’s asset-price bubble reached a peak around the end of 1989. The Nikkei 225 index reached an intraday record of 38,957.44 on December 29, 1989, after years of rapid increases in stock and land prices. The bubble had been supported by easy credit, rising expectations, and strong confidence in Japan’s economy.
Asset prices then fell dramatically. The Nikkei lost much of its value, while land prices and bank balance sheets also deteriorated. Japanese banks carried large amounts of troubled lending, and efforts to resolve bad loans and revive demand took years. The prolonged period of weak growth, low inflation, and financial repair became known as Japan’s Lost Decades.
The phrase usually refers to the 1990s and can extend into the 2000s or later, depending on the measurement used. It is not a single officially defined period, but Japan’s post-bubble stagnation is its standard historical example.