Japan Housing Bubble
If you are wondering why the effects of the housing bubble bursting in the US seems to preoccupy the economists today, then it is about time you looked into Japan's housing bubble and its subsequent crash. |
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The housing bubble burst in Japan completely devastated the island nation's economy, which is considered second to that of the US. Japan suffered one of the biggest housing market crashes in the history of economics.
Japan's housing bubble was worth around $18 trillion in 1991 when it was at its peak. However, Japan's central bank decided to raise the interest rates aggressively leading to a crash in the stock market as well as the property market. Investors started selling stocks to absorb the losses they were suffering in the real estate market, while others started land and homes to absorb the losses from the stock market. Today, the country is still recovering from the devastating effects of the housing market crash. In fact, land in Japan today is worth less than half compared to what it was at the peak of the housing bubble in 1991.
Japan's housing bubble is really unique. From 1985 to early part of 1991, the housing market was booming. The reason behind this is that investors used their so-called profits from the stock market to invest in real estate and properties. This resulted not just in the in stock market booming, but also in the boom of the housing market. Prices of home and land soared uncontrollably. Thus, creating Japan's housing bubble.
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