Many Japanese people have fond memories of the late 80’s. Miyazaki’s My Neighbor Totoro and Nausicaä of the Valley of the Wind had just been rele

What happened after Japan’s economy bubble burst?

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2022-05-20 01:30:12

Many Japanese people have fond memories of the late 80’s. Miyazaki’s My Neighbor Totoro and Nausicaä of the Valley of the Wind had just been released. The Famicon was becoming huge international phenomenon. The sweet sound of City Pop filled the air. These were the true glory days of the Japan economy.

But how did Japan achieve financial success in the late eighties? And what went wrong? Let’s look at the key points of Japan’s bubble economy and what it means today.

The bubble economy refers to the changes in economy in Japan from the late 1980’s to the early 1990’s. The bubble economy can be defined by three main factors:

Asset prices (the cost of land, capital, houses, financial assets, ect) had slowly increased in Japan from 1983, but quickly accelerated in 1986. The most significant increases were stock prices and land. The Urban Land Price index almost quadrupled from 1985 to 1990. The cost of land began to increase in Tokyo, and then soon spread across other large cities, including Osaka, Nagoya, Kyoto, Yokohama and Kobe. Commercial, residential, and industrial land prices all increased nationwide, until reaching a peak in 1990. It is considered that this increase in land prices also led to the increases in stock prices.

The most important reason for the asset price increase is thought to be the Plaza Accord, which doubled the exchange rate value of the US dollar versus the yen between 1985 and 1987.

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