In short
Japan's real estate and stock markets soared to absurd valuations in the late 1980s, peaking in 1989 when Tokyo real estate alone was worth more than all U.S. real estate combined. When the bubble burst in the early 1990s, it triggered a decade-long economic stagnation that reshaped Japan's global standing.
How it unfolded.
The five-minute version
What actually happened.
The Japanese asset price bubble was an economic bubble in Japan from 1986 to 1991 in which real estate and stock market prices were greatly inflated. In early 1992, this price bubble burst and the country's economy stagnated. The bubble was characterized by rapid acceleration of asset prices and overheated economic activity, as well as an uncontrolled money supply and credit expansion. More specifically, over-confidence and speculation regarding asset and stock prices were associated with financial policy deemed to exacerbate them. Through the creation of economic policies that cultivated the marketability of assets, eased the access to credit, and encouraged speculation, the Japanese government started a prolonged and exacerbated Japanese asset price bubble.
As it was happening
14 voices, 2647 days.
One beat at a time. Click any dot on the timeline to jump, press play for autoplay, or use the arrow keys to step.
Bubble expansion begins
Following the Plaza Accord of 1985, the yen appreciates sharply. Bank of Japan cuts the official discount rate to 2.5%, flooding markets with cheap credit. Real estate and stock prices begin accelerating.
Voices from this moment (1)
Bubble expansion begins
Jan 1
“Following the Plaza Accord of 1985, the yen appreciates…”
As it was happening
14 voices, 2647 days.
Day 0 · January 1, 1986
Bubble expansion begins
Following the Plaza Accord of 1985, the yen appreciates sharply. Bank of Japan cuts the official discount rate to 2.5%, flooding markets with cheap credit. Real estate and stock prices begin accelerating.
“Following the Plaza Accord of 1985, the yen appreciates…”
- Bubble expansion begins, Jan 1
Day 656 · October 19, 1987
Global stock market crash passes
While U.S. and other markets crater on Black Monday and after, Japan's market proves more resilient. Confidence in Japanese assets grows further.
“While U.”
- Global stock market crash passes, Oct 19
Day 730 · January 1, 1988
Land prices soar nationwide
Commercial real estate in Tokyo, Osaka, and other major cities experiences double-digit annual appreciation. Financial institutions aggressively lend against inflated collateral.
“Commercial real estate in Tokyo, Osaka, and other major…”
- Land prices soar nationwide, Jan 1
Day 1216 · May 1, 1989
Official discount rate raised to 3.75%
Bank of Japan Governor Yasushi Mieno begins tightening monetary policy in response to inflation concerns, though rates remain accommodative by historical standards.
“We must take decisive action to prevent asset price…”
- BOJ policy statement, May 1989, May 31
“We build products, not real estate empires.”
- Synthesized from period accounts - media interviews, September 1989, Sep 12
“A modest apartment in Tokyo now costs 20 times annual…”
- Synthesized from period accounts - consumer surveys and media vox pop, August 1989, Aug 20
“Japanese equities trading at 60 times earnings.”
- Nikkei Financial Daily interview, October 1989, Oct 15
“Japan's fundamentals are strong.”
- Synthesized from period accounts - corporate statements and shareholder meetings, 1989, Jun 30
“Bank of Japan Governor Yasushi Mieno begins tightening…”
- Official discount rate raised to 3.75%, May 1
Day 1458 · December 29, 1989
Nikkei index peaks
The Nikkei 225 closes at 38,957.44, the highest level in its history. Japanese stock market capitalization exceeds $4 trillion.
“The Nikkei 225 closes at 38,957.”
- Nikkei index peaks, Dec 29
Day 1473 · January 13, 1990
Selling pressure mounts
Stock market begins declining sharply. Real estate sales slow and prices plateau as credit conditions tighten further.
“Stock market begins declining sharply.”
- Selling pressure mounts, Jan 13
Day 1734 · October 1, 1990
Official discount rate reaches 6%
Bank of Japan continues aggressive tightening. Credit becomes progressively more expensive, choking off speculative demand.
“Bank of Japan continues aggressive tightening.”
- Official discount rate reaches 6%, Oct 1
Day 2191 · January 1, 1992
Bubble definitively bursts
Asset prices collapse across both real estate and equities. The Nikkei falls below 20,000. Financial institutions face massive nonperforming loan problems.
“Asset prices collapse across both real estate and equities.”
- Bubble definitively bursts, Jan 1
Day 2647 · April 1, 1993
Economic contraction widens
GDP growth turns negative. Corporate profits decline sharply. Banks begin restricting lending aggressively, deepening the credit crunch.
“GDP growth turns negative.”
- Economic contraction widens, Apr 1
The numbers.
4 numbers that anchor the scale.
By the numbers
The countable parts.
Peak Nikkei index level
0.44 on December 29, 1989
Bubble period
0–1991
Japanese GDP growth rate during bubble
0–5% annually
Year Bank of Japan began tightening
0
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Sources & citations.
Sources
Where this came from.
Every claim on this page traces to a public, license-clean source. We don't asterisk well.
Wikipedia
1 source- 1.Japanese asset price bubble
en.wikipedia.org