I’ve been pleasantly surprised that some of my most popular posts are excerpts from the only history book I ever wrote, Panic, Prosperity, and Progress. Over this holiday weekend, I’ll be sharing, over the course of four days, the chapter dedicated to the inflation and bursting of the Japanese bubble of the 1980s. I think you’ll find some interesting parallels with China. You can read the first part here and second part here.
Japan’s economic growth did not, of course, go unnoticed by its stock market. The Nikkei 225 index, which stood at a price level of 1929 on May 31, 1970, grew steadily to 5359 by January 31 of 1973, an expansion of 177%. By August 31, 1981, the Nikkei stood at 8019, a growth of about 315% from the 1970 level. As tremendous as those returns are, looking at the long-term chart of the Nikkei, the growth was relatively steady and, in light of the bubble to come, quite muted.
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