sourced story
1990-1991 CEGeneral source · 2 sourcesWell documented

The Bubble Bursts and Japan Enters Its Lost Decades

The Nikkei's 1989 peak still hasn't been fully recovered a quarter-century later

On the timeline · around 1990-1991 CE · Postwar and Contemporary JapanPostwar and Contemporary JapanThe Bubble Bursts and Japan Enters Its Lost Decades196019701980199020002010

Quick facts

Nikkei peak
38,915.87 (29 December 1989)
Bubble burst
1990-1991
Nikkei level, end of 2014
c. 17,000 (45% of peak)
Popular name
The "lost decade(s)"

What happened

Japanese stock and land prices tripled during the 1980s in what became known as the bubble economy; the Nikkei stock index closed out 1989 at 38,915.87, its bubble-era peak. The bubble burst at the start of the 1990s, and Japan lapsed into a prolonged deflationary slump. A quarter-century later, Nippon.com reported, the Nikkei had only recovered to around the 17,000 level by the end of 2014, just 45 percent of its 1989 high, a slower recovery in relative terms than the Dow Jones took to surpass its pre-Great-Depression peak after the 1929 crash. "In terms of leading stock indicators," the outlet concluded, "the collapse of the bubble economy and subsequent long-term slump in Japan are even more serious than the Great Depression in the United States."

Why it matters

The scale and duration of Japan's post-bubble stagnation, still referred to as the "lost decade" or "lost decades" depending on how it is measured, became a global reference case for how a modern industrial economy can stall out for a generation despite continued technological sophistication, reshaping how economists think about asset bubbles, deflation, and monetary policy at the zero lower bound.

How we know

The bubble's peak and subsequent collapse are tracked through Nikkei index data and Bank of Japan monetary records from the period, giving a continuous quantitative record of the boom and its aftermath.

Sources

See something wrong? . Corrections with a source get fixed fastest.

Part of a timelineHistory of Japan34 events · From cord-marked pottery on a Neolithic archipelago to a nuclear disaster on a shaken coastline, sixteen thousand years of islands remaking themselvesView all →