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  • Japananese Asset Bubble

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    Unnat Churi
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    This document summarizes Japan's asset price bubble that occurred in the late 1980s. It describes how postwar policies and the Plaza Accord led to a surge in savings and easy credit that fueled a rapid rise in stock and real estate prices. The Nikkei stock index tripled from 1985 to 1989 and real estate prices in Tokyo became 350 times higher than comparable land in Manhattan. However, the Bank of Japan tightened monetary policy in 1989, causing the bubble to burst as asset prices collapsed through the early 1990s. This led to economic stagnation, bankruptcies, and high unemployment during Japan's "Lost Decades."

    Original Description:

    Explains Japanese crisis in early 1990s

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    This document summarizes Japan's asset price bubble that occurred in the late 1980s. It describes how postwar policies and the Plaza Accord led to a surge in savings and easy credit that fueled a rapid rise in stock and real estate prices. The Nikkei stock index tripled from 1985 to 1989 and real estate prices in Tokyo became 350 times higher than comparable land in Manhattan. However, the Bank of Japan tightened monetary policy in 1989, causing the bubble to burst as asset prices collapsed through the early 1990s. This led to economic stagnation, bankruptcies, and high unemployment during Japan's "Lost Decades."

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
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    Download as ppt, pdf, or txt
    17 views13 pages

    Japananese Asset Bubble

    Uploaded by

    Unnat Churi
    This document summarizes Japan's asset price bubble that occurred in the late 1980s. It describes how postwar policies and the Plaza Accord led to a surge in savings and easy credit that fueled a rapid rise in stock and real estate prices. The Nikkei stock index tripled from 1985 to 1989 and real estate prices in Tokyo became 350 times higher than comparable land in Manhattan. However, the Bank of Japan tightened monetary policy in 1989, causing the bubble to burst as asset prices collapsed through the early 1990s. This led to economic stagnation, bankruptcies, and high unemployment during Japan's "Lost Decades."

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    Download as ppt, pdf, or txt
    of 13

    Japanese Asset Price Bubble

    Presented By:
    Unnat Churi (M15009)
    Yashodhan Deshmukh (M150
    Ashutosh Dhale (M15011)
    Ashay Dhuri (M15012)

    Background
    Japanese industries destroyed due to WWII
    Post WWII policies & tariffs encouraged savings by

    the population
    Plaza Accord (Depreciation of US $ against )

    Trade surplus
    Yen ( ) appreciates
    Domestic companies found it easy to obtain money

    Japanese products became cheaper to manufacture


    Zaitech

    The Bubble
    Tokyo Stock Exchange Nikkei tripled from 1985 to

    1989 and hits record high of 38,957.44 in fourth


    quarter 1989

    Source: Japan real estate institute

    The Bubble
    Unbelievable increase in real estate prices.

    Source: Japan real estate institute

    The Bubble
    Real estate prices in Tokyo became about 350

    times the value of comparable land in Manhattan


    Value of Tokyo Imperial palace was rumored to be
    equal to entire state of California in same year
    Strong Balance sheets of corporate organizations
    Exaggerated spending

    Bubble Burst
    BOJ realized the bubble and responded by

    tightening monetary policy


    From 1989 to 1990 discount rates are increased
    five times to cap at 6%
    Nikkei collapsed from 39000 in 1989 to 15000 in
    1992
    This crash triggered the burst of real estate bubble

    Bubble Burst
    Fall in Real Estate prices.

    e.g Price of an apartment in Tokyo


    1990: $ 800000
    2000: $ 500000

    Bubble Burst
    Bankruptcy

    $ 640 million of Bad loans in year 2000


    35 Financial institutions went Bankrupt

    Effects
    Reduction in household income
    Increase in unemployment from 2% in 1992 to

    4.7 % in 2000
    Manufacturers lost their competitive edge due to
    disinvestment
    Rise of Zombie firms

    The Lost Decades


    Time period from 1991-2010
    GDP fell from $ 5.33 trillion to $ 4.36 trillion over

    period of 1995-2007
    Competition to Japanese firms from Korean and
    Chinese firms
    Wages of workers fell by 13% from 1997.

    Recent Times
    Nikkei trading at 18322 as on 7th October 2015
    Japans GDP is 4.6 trillion $
    Unemployment rate of 3.6%
    Real estate prices 20% of the prices during peak

    References
    www.thebubblebubble.com/japan-bubble/

    Japan's Bubble Economy by www.sjsu.edu


    The Japanese Tragedy The Economist Blog.
    http://www.reuters.com/article/2012/08/17/jap

    an-economy-estimate-dUSL4E8JH1TC20120817
    Japan Real estate institute
    Investopedia

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