Japan’s 1989 asset-price bubble preceded the country’s prolonged market slump often called the Lost Decades.
Japanese property and stock prices rose dramatically during the second half of the 1980s. Easy credit, strong optimism, and speculative investment pushed land values and equity valuations to extraordinary levels. The Nikkei 225 reached its historical closing peak of 38,957.44 on December 29, 1989.
The bubble then burst. The Nikkei fell sharply during the early 1990s, while commercial land prices also declined. Banks were left with bad loans, and Japan experienced weak growth, deflationary pressure, and repeated financial difficulties. The phrase “Lost Decades” commonly refers to the long period of economic stagnation beginning in the 1990s, although economists debate its precise length and causes. Japan’s crash was not the same as the 1997 Asian financial crisis, which began with Thailand’s currency problems and affected several other economies.