Japan’s 1989 bubble collapse caused the Nikkei 225 to lose most of its value over the following years.
Japan’s asset-price bubble reached its peak in late 1989. The Nikkei 225 closed at a record high of 38,915.87 on December 29, 1989. After the Bank of Japan tightened monetary policy and authorities took steps that reduced speculative borrowing, Japanese share and land prices fell sharply. The Nikkei lost more than half its value by 1990 and continued declining into the early 2000s.
The collapse helped produce Japan’s “Lost Decades,” a prolonged period marked by weak growth, deflationary pressure, banking problems, and damaged corporate balance sheets. The crash was not just a stock-market event: urban land prices had also risen dramatically, and banks were heavily exposed to property-related lending. The Nikkei eventually recovered its 1989 closing record only in 2024, more than three decades later. Japan is the necessary answer because the Nikkei 225 is Japan’s principal stock-market index and the bubble was centered in Japanese financial and property markets.