The Heisei era began in 1989 with the bubble economy and its collapse. It was the start of a turbulent period in which the peak and decline of the Japanese economy existed side by side.
Basic Knowledge
On January 7, 1989, following the death of Emperor Showa, Crown Prince Akihito (later Emperor Emeritus) ascended the throne, and the Heisei era began the next day, January 8 (the official in charge of the name change was Chief Cabinet Secretary Keizo Obuchi). The Plaza Accord of 1985 (New York, G5) rapidly caused the yen to appreciate and the dollar to depreciate (from 240 yen per dollar to the 120-yen range), and the bubble economy began in 1986. Speculative money flowed into land and stocks under a low-interest-rate policy, and at the end of 1989 the Nikkei Stock Average reached 38,915 yen, its highest level ever. In April 1989, the consumption tax was introduced at 3% under the Takeshita administration. In 1990, the Bank of Japan tightened monetary policy and a land value tax was introduced, beginning the collapse of the bubble economy as stock and land prices fell.
1989 Beginning of the Heisei era, introduction of 3% consumption tax, fall of the Berlin Wall, Tiananmen Square incident
1990 Reunification of East and West Germany, stock prices fall after reaching their peak
1991 Gulf War (Japan contributed 13 billion dollars), collapse of the Soviet Union, bubble collapse intensifies
1992 PKO Cooperation Law (dispatch of the Self-Defense Forces to Cambodia)
1993 Collapse of the 1955 System, Morihiro Hosokawa coalition cabinet
1994 Parallel electoral system combining single-member districts and proportional representation
Further Study (Background and Effects)
After the bubble collapsed, banks held bad loans, companies reduced investment, and the “lost decade” (later called the lost 30 years) began. In the 1993 general election, the Liberal Democratic Party went out of power, and a coalition cabinet of eight non-LDP parties and groups led by Morihiro Hosokawa was formed. This brought down the 1955 System (LDP single-party government and the Socialist Party as the largest opposition party), which had continued since 1955. Internationally, the Cold War ended with the fall of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991. During the Gulf War in 1991, Japan made a large financial contribution but could not make a human contribution, causing debate. In 1992, the PKO Cooperation Law led to the first overseas dispatch of the Self-Defense Forces, to Cambodia.
- Heisei era began = January 8, 1989 (Emperor Showa died on January 7)
- Introduction of 3% consumption tax = April 1989, Takeshita administration
- Highest stock price = 38,915 yen at the end of 1989
- Bubble collapse = intensified from 1990-91
- Collapse of the 1955 System = 1993, Morihiro Hosokawa administration
- PKO Cooperation Law = 1992, dispatch to Cambodia
Points to Note (Easily Confused)
① The date of the name change was January 8, 1989; the emperor died the previous day, January 7. ② Changes in the consumption tax rate: 1989 3% → 1997 5% → 2014 8% → 2019 10%. ③ The 1955 System was the LDP-dominated political structure that lasted from 1955 to 1993. ④ Organize the sequence of the Plaza Accord (1985), Louvre Accord (1987), beginning of the bubble (1986), and bubble collapse (around 1990).
Practice
- On what date did the Heisei era begin?
- In what year was the consumption tax first introduced, and what was its rate?
- Who was the prime minister of the non-LDP coalition cabinet formed in 1993?