Japan’s 1989 asset-price collapse began the long period commonly called the Lost Decade.
During the late 1980s, Japanese property and stock prices rose to extraordinary levels amid abundant credit and financial optimism. The Nikkei 225 reached its record closing level on December 29, 1989. After monetary tightening and the bursting of the asset bubble, equity and land prices fell for years.
The resulting weakness affected banks, businesses, household wealth, and government finances. Banks carried large volumes of nonperforming loans, while companies reduced investment and consumers became more cautious. Japan experienced prolonged low growth and periods of falling prices.
“Lost Decade” originally described the 1990s, although some economists extend the term into the 2000s because the economic stagnation continued. The episode was not a single day’s crash, but a sustained collapse after one of the largest modern stock and property bubbles.