The Japanese stock index that peaked at 38,957.44 on 29 December 1989 was the Nikkei 225.
The Nikkei 225 is a price-weighted index of 225 companies listed on the Tokyo Stock Exchange’s Prime Market. Its 1989 peak came near the end of Japan’s late-1980s asset bubble, when land and equity prices had risen dramatically. The Bank of Japan tightened monetary policy, and confidence in inflated asset values weakened.
Japanese share prices then entered a prolonged decline. The Nikkei’s fall became a symbol of the transition from the exuberance of the bubble years to Japan’s “Lost Decades,” a period marked by weak growth, deflationary pressure, banking problems, and efforts to repair corporate balance sheets.
A frequent confusion is assuming that the Nikkei is a capitalization-weighted index like many major global benchmarks. It is price-weighted, so companies with higher share prices have greater influence than companies with lower share prices, subject to index adjustments. TOPIX is a separate broad Japanese index.