This article compares the Nikkei Average's four major past market crashes with the current decline, organising the scale of each decline and the date on which the previous high was recovered. Based on examples showing that recovery took approximately 34 years from the 1989 bubble, approximately 15 years for the IT bubble, approximately 7 years and 7 months following the global financial crisis, and approximately 9 and a half months following the COVID-19 shock, it assesses the current situation. As of now, the decline is 11.3% from the October high. Three scenarios are presented for the outlook.
The Nikkei Average's performance in four past crash episodes is compared based on the scale of the decline and the recovery date. The decline was approximately 63.2% during the collapse of the 1989 bubble, approximately 63.5% during the collapse of the IT bubble, approximately 61.4% during the global financial crisis, and approximately 31.3% during the COVID-19 shock. For the recovery date, the first day on which the index exceeded the previous high on a closing-price basis is used in each case.
Japan's bubble-era high was recorded on 29 December 1989. The closing level fell from approximately ¥38,915 to approximately ¥14,309 on 18 August 1992. Recovery came on 22 February 2024, approximately 34 years and 2 months after the high. The IT bubble high was recorded on 12 April 2000, and recovery came on 24 June 2015, approximately 15 years and 2 months after the high. During the global financial crisis, the index fell from its level on 9 July 2007, with recovery coming on 19 February 2015, approximately 7 years and 7 months later. During the COVID-19 shock, the index fell approximately 31.3% from its January 2020 high by 19 March, and recovered on 5 November of the same year, approximately 9 and a half months later.
More recently, the comparison of the closing prices on 6 October and 23 October shows a decline of approximately 11.3%, from ¥70,683.9800 to ¥62,693.116. This is a change based on recent closing prices, rather than a decline from the all-time high. The outlook is organised into three cases depending on earnings and policy developments.