Japan’s stock-market bubble burst after the late-1980s asset-price boom, beginning the country’s long market slump.
The Nikkei 225 reached an all-time closing high of 38,915.87 on December 29, 1989. It then fell sharply as excessive land and equity valuations unwound, credit conditions tightened, and confidence weakened. Japanese banks and companies were left with damaged balance sheets and large amounts of troubled debt.
The following period is often called Japan’s Lost Decades, although the phrase covers complex economic developments rather than one uninterrupted decline. Deflation, weak demand, banking problems, and changing demographics all affected growth. The Nikkei’s 1989 peak was not surpassed until 2024.
This episode is sometimes confused with the 1997 Asian financial crisis. Japan’s bubble collapse began years earlier and was centered on Japan’s domestic asset market, while the 1997 crisis spread through several Asian economies after pressure on currencies and financial systems.