Japan’s stock-market bubble burst in 1989, beginning a prolonged “lost decade.”
The Japanese asset-price bubble reached its peak when the Nikkei 225 hit 38,957.44 on December 29, 1989. Excessive lending, rising land prices, and speculative investment had pushed Japanese stocks and real estate to extraordinary levels.
After the Bank of Japan tightened monetary policy, asset prices began to fall. The Nikkei lost much of its value during the 1990s, while banks struggled with bad loans secured against depreciating property. Weak demand and financial-sector problems then held back economic growth.
The phrase “Lost Decade” commonly describes Japan’s stagnation during the 1990s, although later weakness led some observers to speak of “Lost Decades.” The episode is often studied as a warning about credit-fuelled bubbles and the difficulty of repairing balance sheets after a collapse.