Japan’s stock exchange was at the center of the speculative bubble known as the Japanese asset price bubble.
During the late 1980s, Japanese share and land prices rose extraordinarily, supported by loose credit, optimistic expectations, and rapid asset speculation. The Nikkei 225 reached its record closing level of 38,915.87 on December 29, 1989.
The Bank of Japan tightened monetary policy, and asset prices began falling around the start of the 1990s. The collapse damaged banks and companies whose balance sheets depended on inflated collateral values. Japan then experienced years of weak growth, banking problems, and deflation, a period often called the Lost Decade, although economic difficulties extended beyond one decade.
The episode is not the same as the 1987 global Black Monday crash. Japan’s bubble peaked later and involved both equities and real estate on an exceptional scale. Its aftermath also influenced later discussions of nonperforming loans, balance-sheet recessions, and the dangers of prolonged asset-price inflation.