Japan’s asset-price bubble burst around 1990, beginning the prolonged decline associated with the Lost Decades.
During the late 1980s, Japanese land and stock prices rose to extraordinary levels amid rapid credit growth, financial liberalization, and strong optimism about the country’s economy. The Nikkei 225 reached its all-time closing high of 38,915.87 on 29 December 1989.
After the bubble burst, share and property prices fell, banks were left with large amounts of bad debt, and companies reduced investment. Deflation and weak demand made recovery difficult. Japan’s first prolonged period of stagnation is commonly called the Lost Decade, although later weakness led many writers to use the plural “Lost Decades.”
The episode is not the same as a single one-day crash. It was a long unwinding of inflated asset prices, followed by banking problems and weak economic growth.