Era 06 · 1989 — 2009

Japan's Lost Decade

Peak to trough

−82% over 20 years

Pulse cycle

4.5s

On the last trading day of 1989, the Nikkei 225 closed at 38,957. Japanese corporate real estate was valued so highly that the grounds of the Imperial Palace were said to be worth more than all the real estate in California. Over the following twenty years, the index lost 82% of its value. Recovery to the 1989 peak did not happen until 2024 — thirty-four years later.

Events in this era

Dec 29, 1989

Nikkei peaks at 38,957

On the final trading day of the 1980s, the Nikkei 225 closed at its all-time high of 38,957.44. Japanese corporate land holdings were valued at roughly four times the US equivalent. The bubble burst on the first trading day of 1990, and Japan has never fully recovered in any metric that matters.

Peak: Nikkei 38,957; crash began Jan 1990

Mar 10, 2009

Nikkei bottoms at 7,055

Almost twenty years later, the Nikkei reached its post-bubble low of 7,055 — down 82% from 1989. The Bank of Japan had been at zero interest rates since 1999, and had pioneered quantitative easing in 2001. Every tool the Fed would use in 2008 and 2020, Japan had tried first — and first run out of.

Japan became the template for post-bubble policy

Feb 12, 1999

Bank of Japan hits zero

The Bank of Japan became the first major central bank to cut its overnight rate to zero. The zero interest rate policy (ZIRP) was a response to the persistent deflation that had followed the 1989 asset bubble collapse. Every subsequent major central bank eventually copied the tool. The Fed first went to zero in December 2008, the ECB in 2016.

ZIRP pioneered; copied by every later developed-market central bank

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