Japan Economic Bubble

Topics: Stock market, Stock exchange, Tokyo Stock Exchange Pages: 2 (704 words) Published: March 17, 2013
Japan experienced a major economic bubble in the latter half of the 1980s. The land and the stock are two major indicators that tell the magnitude of the bubble. THE STOCK
For thirteen years, stock markets grew rapidly and then went parabolic to form bubbles, which peaked in Japan at the end of 1989. The stock prices in Japan began rising in 1983 and went up at a furious pace in 1986 and 1987. On October 20, 1987, stock prices dropped sharply because the New York Stock Exchange had collapsed on the preceding day. Japanese Stock markets lost about a third of its value eighteen months after its peaks. The Nikkei Stock Index has since lost as much as three quarters of its peak value. However, the Tokyo Stock Exchange recovered earlier than the stock exchanges markets in other countries and the stock prices were skyrocketing until the end of 1989. During the Japanese Economic bubble, The Nikkei Dow Jones Average, at the 10,000-yen level in 1984, reached 38,915 yen on the last trading day of 1989. However, the Tokyo stock market fell from the first trading day of 1990. The market kept going down and hit the bottom in October 1998 at 12,869Yen. This meant, in eight years, the Nikkei Dow Jones Average lost 67% of its market value. THE DOLLAR/YEN EXCHANGE RATE

After the World War II, the Dollar/Yen exchange rate was fixed at $1.00=360 yen. In 1972, however, rate moved from fixed to floating system and by 1985, one dollar was worth 240 yen. However, the U.S government felt even at this rate, the yen was still too cheap. A meeting of Finance Ministers of five economically advanced nations (G-5: U.S.A, France, England, Germany, and Japan) was held at the Plaza Hotel in New York, in September 1985. The Plaza Accord was concluded by these ministers to raise the yen’s value against other currencies. The rapid increases in the yen’s value relative to that of the dollar alarmed many Japanese business executives and there was a chorus of complaints from the business sectors...
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