Japan pioneered technology - be it cars, music or televisions and earned heavy royalty through exports. Also a strong tariff policy protected home market from imports which pumped up the yen and led to a massive buildup of new found wealth among consumers & government. Liquidity was high, which spawned an era of easy money, and that fueled a frenzy of stock-and-real estate speculation unrivaled since the U.S. Great Depression. Clearly the market manias were ignited by ridiculously loose credit policies.
Almost overnight, the newly wealthy Japanese were viewed with fear. Japanese cars filled American roadways and Japanese-owned companies started buying out US companies overnight – remember Universal, Columbia pictures…
At the peak of the frenzy, a piece of land at Imperial Palace in Tokyo was more than the value of the entire state of California - which defied all wisdom & senses, but which was mathematically correct as prime office space was going for $139,000 a square foot in Tokyo’s Ginza district, way back in 1989!
But “Irrational Exuberance” is “Irrational” after all. Japanese financial system, especially banks tumbled & Japan couldn’t even overcome 10 years of stagflation. 10 years of lost glory!
In Dec 1989, Nikkei 225 Index topped out at around 39,000. By September 1990, it had nearly been halved. Nikkei ultimately bottomed at 7,830 in April 2003. It hangs around 12,700, still down 67% from its trading high 19 years ago).
The fallout from that meltdown was incredible. By early 2004, houses were selling at 1/10th their peak value, and commercial real estate was selling for less than 1/100th of its peak-market value. All told, an estimated $20 trillion in stock market and real-estate wealth had been vanished!
Almost overnight, the newly wealthy Japanese were viewed with fear. Japanese cars filled American roadways and Japanese-owned companies started buying out US companies overnight – remember Universal, Columbia pictures…
At the peak of the frenzy, a piece of land at Imperial Palace in Tokyo was more than the value of the entire state of California - which defied all wisdom & senses, but which was mathematically correct as prime office space was going for $139,000 a square foot in Tokyo’s Ginza district, way back in 1989!
But “Irrational Exuberance” is “Irrational” after all. Japanese financial system, especially banks tumbled & Japan couldn’t even overcome 10 years of stagflation. 10 years of lost glory!
In Dec 1989, Nikkei 225 Index topped out at around 39,000. By September 1990, it had nearly been halved. Nikkei ultimately bottomed at 7,830 in April 2003. It hangs around 12,700, still down 67% from its trading high 19 years ago).
The fallout from that meltdown was incredible. By early 2004, houses were selling at 1/10th their peak value, and commercial real estate was selling for less than 1/100th of its peak-market value. All told, an estimated $20 trillion in stock market and real-estate wealth had been vanished!
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