Japan’s stock-market crash in 1989 followed the bursting of a major property bubble.
The Japanese asset price bubble grew during the 1980s as credit expanded and investors bid up shares, office buildings, and land. In central Tokyo, property values became extraordinarily high relative to incomes and rents. The Nikkei 225 reached its record closing level on December 29, 1989.
The subsequent decline damaged both households and financial institutions. Banks had lent against property that later lost value, while companies and investors reduced spending and investment. The stock market’s fall therefore interacted with a broader balance-sheet problem.
Japan’s experience is often used as an example of how an asset-price collapse can have effects long after the initial crash. It is also commonly confused with the 1997 Asian financial crisis, which began with pressure on Thailand’s baht and spread through several regional economies.