Which Japanese asset bubble burst and helped trigger the country’s long market decline after 1989?

The Japanese asset price bubble burst after 1989 and helped trigger the country’s long market decline.

During the late 1980s, Japanese land and stock prices rose to extraordinary levels. Easy credit, optimistic expectations, financial deregulation, and speculative investment supported the boom. The Nikkei 225 reached its record closing level of 38,915.87 on December 29, 1989.

The Bank of Japan raised interest rates and policy tightened as concern about speculation increased. Stock and land prices then reversed. The Nikkei lost much of its value during the early 1990s, while banks were left with large non-performing loans backed by depreciated property and securities.

The aftermath became known as Japan’s Lost Decades, although the timing and terminology used by economists vary. Weak demand, deflation, banking problems, demographic pressures, and repeated policy challenges contributed to prolonged stagnation. The episode was broader than a stock-market crash alone: Japan’s property market was central, and land prices continued declining for years after the equity collapse.