The Nikkei 225 marked the peak of Japan’s late-1980s asset bubble before the 1990 market crash.
The index reached its record closing level of 38,915.87 on December 29, 1989. During the preceding boom, Japanese shares and property prices rose dramatically, supported by abundant credit, optimistic expectations and financial speculation. The market’s extreme valuation left it vulnerable when monetary policy tightened.
Japanese stock prices began falling in 1990, and the decline continued for years. Property values also dropped, weakening banks and companies whose balance sheets depended on inflated asset prices. The prolonged aftermath became known as Japan’s Lost Decades, although the causes and timing of that broader stagnation are more complex than the stock-market fall alone.
The Nikkei 225 is different from TOPIX, another major Japanese equity index. The Nikkei is price-weighted and tracks 225 prominent companies, while TOPIX is capitalization-weighted and covers a broader market. The distinction matters when comparing reported market performance.