Japan’s stock-market bubble burst in 1989, beginning a prolonged collapse associated with the Lost Decades.
The Nikkei 225 reached its peak of 38,957.44 on December 29, 1989. The extraordinary rise had been accompanied by surging land and property prices, easy credit, and aggressive speculation. When the Bank of Japan tightened monetary policy, asset prices began to fall.
The Nikkei’s decline damaged banks and companies whose balance sheets depended on inflated property and share values. Nonperforming loans accumulated, credit weakened, and economic growth slowed. Japan experienced long periods of stagnation and deflation during the 1990s and 2000s.
“Lost Decades” is a broad economic description, not the name of one trading day. The stock-market crash was part of a much larger asset-price collapse. Japan’s later financial history therefore differs from a short, sharp crash followed by a quick recovery.