The Nikkei 225 began its historic collapse in 1990 after Japan’s asset-price bubble burst.
Japan experienced extraordinary rises in land and share prices during the second half of the 1980s. Easy credit, optimistic expectations, and speculation pushed valuations far above levels supported by ordinary earnings. The Bank of Japan then raised interest rates, and policy tightening helped deflate the property and equity boom.
The Nikkei 225 reached an intraday peak of 38,957.44 on December 29, 1989. It fell sharply during 1990 and continued weakening for years, while falling property values damaged banks and heavily indebted companies. The resulting stagnation is often associated with Japan’s “lost decades.” The crash did not begin in 1985, when the Plaza Accord was signed, although that agreement is commonly discussed as part of the background to the later bubble.