Japan’s stock-market bubble burst in 1990 after the Nikkei 225 reached its record high.
The Nikkei 225 peaked at 38,915.87 on December 29, 1989, and then began a prolonged decline. The boom had been fueled by rapid credit growth and soaring prices for Japanese stocks and real estate. When monetary policy tightened and confidence weakened, the inflated asset values became unsustainable.
The collapse produced what became known as Japan’s Lost Decades. Banks carried large amounts of bad debt, investment and consumption weakened, and economic growth remained sluggish for years. The Nikkei did not return to its 1989 peak for decades.
This episode is sometimes confused with the 1997 Asian financial crisis, which began later and centered initially on currency and debt pressures in economies such as Thailand, Indonesia, and South Korea. Japan’s earlier crash was primarily the bursting of a domestic asset-price bubble.