Japan’s stock exchange crash in 1990 symbolized the start of the country’s lost decades.
Japan’s asset-price bubble reached its peak around the end of 1989. The Nikkei 225 reached an intraday record of 38,957.44 on December 29, 1989. After interest rates rose and property and share prices began falling, the Japanese equity market entered a prolonged decline.
The collapse damaged banks and corporations because land and shares had been used as collateral for extensive borrowing. Nonperforming loans accumulated, and financial institutions were slow to recognize or resolve their losses. Property prices also fell for many years, weakening household and business balance sheets.
The term “lost decades” usually refers to Japan’s long period of weak growth, deflation, and financial stagnation after the bubble burst. The timing and number of decades vary by source, so the phrase does not identify one precisely bounded period. The crash is also different from the 1997 Asian financial crisis, which began elsewhere in East Asia.