What is a bubble economy in Japan?

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.

Why did the Japanese asset price bubble burst?

However, this level of growth was not sustainable and eventually led to the burst of the bubble in the early 1990s. The Japanese asset price bubble was characterized by three main features: asset inflation, significant increases in the money supply and credit, and overheating economic activity.

What caused the bubble era in Japan?

Bubble Era Japan also saw a huge rise in equity prices, with the Nikkei Stock Average jumping from 11,542 in 1985 to 38,915 in 1989. This massive increase was driven by speculative investments and an influx of foreign capital. However, this level of growth was not sustainable and eventually led to the burst of the bubble in the early 1990s.

Why did Japan's economy stagnate in 1992?

In early 1992, this price bubble burst and Japan'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.