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.
The Bank of Japan had raised rates from 2.5% to 6.0% over 1989 in an explicit attempt to prick the real estate bubble. The rate increases worked, then kept working for twenty years. It remains the cleanest documented case of a central bank overshooting — and the reference point every modern central bank uses when it considers tightening.
05 · Japan's Lost Decade
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.
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