Which Japanese stock-market bubble burst in 1989, beginning a prolonged period of market and property declines?

The Japanese asset price bubble burst in 1989, beginning a prolonged period of market and property declines.

Japan experienced extraordinary increases in share and land prices during the second half of the 1980s. Easy credit, strong optimism, financial deregulation, and rapid lending helped push asset valuations far above levels supported by ordinary economic earnings. The Nikkei 225 reached its historical closing peak of 38,915.87 on December 29, 1989.

The Bank of Japan tightened monetary policy, and the bubble subsequently deflated. Share prices fell heavily, while land prices continued declining for years. Banks were left with bad loans and weakened collateral, contributing to a long period of slow growth and financial restructuring.

The episode is often called Japan’s “lost decade,” although the economic stagnation and deflation extended beyond ten years. It was not merely a stock-market crash: commercial land, residential property, banks, corporations, and household balance sheets were all affected. The later experience became a warning about leverage and asset-price excesses.