Which speculative bubble burst when Japan’s Nikkei 225 began its historic decline in 1990?

The speculative bubble that burst when Japan’s Nikkei 225 began its historic decline in 1990 was the Japanese asset price bubble.

Japan experienced rapidly rising land and stock prices during the late 1980s. Easy credit, optimistic expectations, and financial deregulation helped push valuations to extraordinary levels. The Nikkei 225 reached an intraday peak of 38,957.44 on December 29, 1989, then began a prolonged decline in 1990.

Land prices also fell, weakening banks and borrowers that had relied on inflated collateral values. Japan’s subsequent period of slow growth and financial restructuring is often called the Lost Decades. The damage extended well beyond the initial stock-market fall because bad loans remained in the banking system for years.

This episode is not the same as the 1990s dot-com crash. Japan’s bubble centered heavily on domestic equities and real estate, while the dot-com bubble focused on internet and technology companies in the United States and elsewhere.