Bank of Japan tightening and Japan’s equity-market peak

Conditions at the time

Assessments of future inflation differed while the official discount rate remained low.

How events unfolded

The Bank of Japan raised the discount rate in month 5, and even after further hikes, equities reached their peak at year-end.

Stakeholders and impacts

The central bank, the Economic Planning Agency and equity-market participants assessed different risks.

Information available at the time

Authorities described the initial hike as a preventive measure against inflation pressure.

Findings confirmed later

The effects of rate hikes on money and asset prices appeared with a lag.

Alternative interpretations and limitations

The sequence alone cannot establish a single causal relationship between rate hikes and subsequent equity declines.

Source-based context and interpretation

BOJ researchers describe tightening intended to support price stability and sustainable growth, but equity, land and activity turning points did not coincide. The economy and money continued expanding for a time after equities began falling; lending restraint and rising real rates also emerged with different lags. ASSETCASTING interpretation: Track credit supply, real rates and asset-specific reactions instead of pairing one rate decision with one crash date. The study illustrates transmission lags, not a finding that a single hike caused every subsequent loss.

Evidence coverage through 2001-02 · Sources checked 2026-10-14

• The Asset Price Bubble and Monetary Policy ↗

Related events and periods1

• Disinflation and expanding financial-market connections →

  An event or period whose recorded start falls within this editorial interval. This does not establish that it caused or represents the characteristics of the era, nor guarantee that the entire period falls within the interval.