Japan’s stock-market bubble burst in 1989, beginning a prolonged crash in asset prices.
Japan’s Nikkei 225 reached its historical closing peak of 38,915.87 on December 29, 1989. The peak came after years of extraordinary rises in Japanese share and land prices, supported by easy credit, optimistic expectations, and aggressive lending. When monetary policy tightened and confidence weakened, both markets began to fall.
The decline was not a brief one-day panic. Japan experienced a long period of weak growth, falling property values, stressed banks, and corporate deleveraging. The Nikkei fell far below its 1989 peak, while the country entered what became known as the “Lost Decades,” a term generally applied to prolonged economic stagnation from the 1990s onward.
The Japanese experience is often studied because banks were slow to recognize bad loans and because collapsing real-estate collateral weakened the financial system. It is also different from the 1987 global crash: Japan’s episode centered on an enormous domestic asset bubble and lasted for many years.