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Japan's Stocks Soar Back: Is This Rally Distinct from the 1990s 'Bubble High'?

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Japan's Stock Rally Evokes Memories of 1990 Bubble Economy

Japan's stock markets have reached new heights not seen since the 1990s, reminiscent of the country's "bubble economy" before it plunged into the so-called "lost decade". The Nikkei 225 exceeded the 30,000 mark again since the 1980s. However, this figure is still 18% lower than its all-time high in 1989. The bubble burst after the Bank of Japan tightened its monetary policy, which triggered the collapse of equity and land prices and led to the crash of the Nikkei index. It is unlikely to happen again today, as experts believe Japan is in a different situation now.

Changes Since 1990

According to Dong Chen, head of macroeconomic research at private bank Pictet, Japan is not facing the same economic situation compared to the one in the late 1980s. Economist Ryota Abe from Sumitomo Mitsui Banking Corporation shares the same sentiments and opines that a bubble economy does not exist today.

Reasons for the 2023 Stock Market Rally

Unlike the previous stock rally, which was due to low borrowing rates fueled speculation, the current stock market rally is different because listed companies have performed better than expected, thanks to a weak yen, making Japanese products relatively cheaper. This leads to stronger economic performances overseas. Furthermore, Japanese firms have bought back their own stocks in response to the Tokyo Exchange Group's push for greater capital efficiency. Japanese corporate spending has started ticking higher, which means companies are investing again, following Prime Minister Shinzo Abe's signature economic policies.

Foreign Investment in Japan

With Japan's economic recovery underway and higher wage growth in 2023, foreign investors have taken a renewed interest in the country. Japan's economic potential is increasing, thanks to the lower value of the yen and possible higher upside potential for equities.

Bank of Japan's Future Role

Whether the stock market will continue to rise or not will depend heavily on the Bank of Japan's role. With inflationary pressures building up in Japan, monetary policy could become "marginally tighter" in the next 12 months, as stated by Oliver Lee, client portfolio manager at Eastspring Investments.

The Long-Term Investment Case in Japan

The long-term investment case in Japan is still robust, according to Lee, citing further increased underlying corporate profitability, corporate governance, and improvement-backed institutions continuing to develop the Tokyo Stock Exchange, with most international investors still retaining underweight positions in Japan. With corporate share buybacks expected to continue, investor demand for Japanese equities should remain strong heading into the second half of this year.


The recent stock rally in Japan has evoked memories of the country's "bubble economy" before the devastating crash in 1990 that led to the "lost decade". However, experts believe that Japan is in a different economic situation now. The current stock market rally is due to the stronger-than-expected performance of Japanese listed companies thanks to a weak yen, making Japanese products relatively cheaper. Furthermore, Japanese firms have bought back their stocks, leading to higher corporate spending and increased investment. Foreign investors have shown interest in the country due to Japan's economic recovery and higher wage growth, creating a higher economic potential. However, the Bank of Japan's role in tight monetary policy and inflationary pressure could significantly impact the stock market's future rise. So, any new business investing in the Japanese stock market need to consider these situations before taking any decision. Growth and investment will continue for the long-term investment case in Japan, and the demand for Japanese equities will remain strong in the upcoming years. Therefore, startups and established firms must study and analyze the situation thoroughly before any actions.


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