Japan’s 1990 market collapse followed the bursting of its property and equity bubble. During the late 1980s, Japanese land and share prices rose to extraordinary levels amid easy credit, strong optimism, and heavy speculation.
The Nikkei 225 reached its historic closing peak of 38,915.87 on December 29, 1989. The Bank of Japan then tightened monetary policy, and asset prices began to fall. The stock-market decline was followed by a long property slump, banking-sector problems, weak investment, and prolonged economic stagnation.
The episode is often called Japan’s asset-price bubble or the bubble economy. It is also linked to Japan’s “lost decades,” although the exact duration and causes of that stagnation are debated. Japan’s experience became a major example of how a financial boom can leave lasting damage when banks, companies, and households are heavily exposed to falling asset values.