Japan’s 1989 asset-price collapse led to the period known as the country’s “Lost Decades.”
Japanese stock and property prices rose dramatically during the late 1980s. The Nikkei 225 reached its historical intraday high of 38,957.44 on December 29, 1989. After the bubble burst, equities and land values fell for years, damaging banks, businesses, and household balance sheets.
The resulting stagnation is commonly called Japan’s Lost Decades, although scholars debate the exact number of decades and the dates used. Deflation, weak demand, nonperforming loans, demographic pressures, and delayed financial restructuring all contributed to prolonged economic weakness.
The stock-market collapse was closely linked to the property collapse, but the two markets did not move in exactly the same way. Japan’s experience became an influential case study in asset bubbles, banking repair, monetary policy, and the difficulty of reviving demand after a balance-sheet shock.