Japan’s stock-market bubble burst in 1990 after the country’s late-1980s asset-price boom.
Japanese share and land prices rose dramatically during the second half of the 1980s. The Nikkei 225 reached an intraday record of 38,957.44 on December 29, 1989. It then declined sharply, and the bursting of the bubble helped begin Japan’s prolonged period of weak growth and financial distress.
The boom was supported by easy credit, optimistic expectations, and high land and equity valuations. When the Bank of Japan tightened monetary policy and interest rates rose, asset prices fell. Banks were left with large quantities of nonperforming loans secured by declining property.
The consequences extended beyond the initial market crash. Japanese banks and companies spent years repairing balance sheets, while deflation and weak demand persisted. The period is often called Japan’s “Lost Decades,” although scholars debate the exact boundaries and causes. Japan’s experience is frequently cited as a warning that a financial bubble can damage the real economy long after its price peak.