By the late 1980s, Japan's economic miracle had inflated into the largest asset bubble in history. The Nikkei stock index peaked at 38,957 on December 29, 1989 — a level it would not regain for 34 years. Tokyo real estate prices were so extreme that the grounds of the Imperial Palace were theoretically worth more than all the real estate in California. Japanese corporations were buying iconic American assets: Rockefeller Center, Columbia Pictures, Pebble Beach golf course. Western commentators predicted Japan would overtake the United States as the world's largest economy. Then, in January 1990, the bubble burst. The Nikkei lost nearly 50% of its value within a year. Real estate prices collapsed by up to 80% in major cities. Banks were left with trillions of yen in bad loans they refused to write off, creating "zombie banks" that strangled lending. What followed was not a recession but a fundamental shift: Japan entered the "Lost Decade" — which became the Lost Decades, plural. GDP growth averaged barely 1% through the 1990s and 2000s. Deflation set in, wages stagnated, and a generation of young Japanese faced diminished prospects. The demographic crisis — an aging population and declining birth rate — compounded the economic malaise. Japan's experience became a cautionary tale studied by economists worldwide, and its policy responses (or lack thereof) influenced how other nations, including the United States in 2008, handled their own financial crises.
The Bursting of Japan's Bubble — The Lost Decades Begin
Japan's colossal asset bubble — when the Imperial Palace grounds were supposedly worth more than all of California — burst in 1990, plunging the economy into decades of stagnation that redefined the nation.
Historical Context
1990The Bursting of Japan's Bubble — The Lost Decades Begin
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