At the 1989 peak of Japan’s asset price bubble, the grounds of the Tokyo Imperial Palace were estimated to be worth more than all the real estate in California. This episode follows the chain of unintended consequences that led there, beginning with the 1985 Plaza Accord. The deal to weaken the dollar sent the yen from about 238 to 165 per dollar in a year, made Japanese exports painfully expensive, and tipped the country into the endaka recession.

The Bank of Japan answered by cutting its discount rate from 5 percent to 2.5 percent, and cheap money found a perfect outlet in land. Inheritance taxes ran as high as 75 percent, but land was appraised at half its market value, and an old lease law gave owners every reason to leave lots empty. Banks that had lost their blue chip clients lent freely against inflated property, stocks and land fed each other, and the Nikkei climbed from around 13,000 to nearly 39,000 before rate hikes ended the party.

• Japan accepted the painful currency adjustment because the U.S. Congress was threatening punitive tariffs that would have locked its exporters out of the American market.
• Ordinary salarymen could borrow up to 100 million yen against their homes as banks stopped underwriting on income and assumed land would never fall.
• Commercial land in Tokyo jumped 122 percent in a single year, and prime Ginza plots reached 30 million yen per square meter.
• Osaka restaurant owner Nui Onoue used forged deposit certificates to borrow more than two trillion yen, and her collapse dragged down two banks.
• Banks kept insolvent zombie companies alive with sham loan restructurings, trapping capital so thoroughly that Japan’s GDP in 2017 was only 2.6 percent higher than in 1997.