Japan’s housing and stock bubbles burst during the early 1990s, beginning the country’s Lost Decades.
Japan experienced a spectacular asset-price boom during the second half of the 1980s. Land values and share prices rose far beyond levels supported by many underlying economic measures. The Nikkei 225 reached its historic closing peak of 38,915.87 on December 29, 1989.
The bubble then collapsed. Japanese stock prices fell heavily, and property values declined for many years. Banks were left with large amounts of bad debt, while weak demand and falling prices made recovery difficult. The phrase “Lost Decades” usually refers to the prolonged period of economic stagnation that followed, although the timing and number of decades vary among sources.
A common mix-up is confusing Japan’s crash with the Asian financial crisis of 1997. Japan’s bubble burst earlier and was primarily a domestic asset-price collapse. The 1997 crisis began with pressure on Thailand’s baht and spread across several Asian economies.