Points in history that had great influence on the Nikkei
There are few stock markets in the world that have been on the wild ride that the Nikkei has been on over the years. After a rapid run up in the eighties it has since lost more than eighty percent of its value. There have been a few important points in history that have had a huge impact on the Nikkei index.
The first point in history that had a major influence on the Nikkei index was the oil crisis of the early seventies. This occurred in 1973 when OPEC reduced the amount of the oil that they were producing. The result was that many countries found that they did not have enough oil to meet their needs. In addition the high price of oil caused severe economic problems for many countries. Japan was one of the worst hit as they relied heavily on cheap oil. The result was the Nikkei went into steep decline. The good news was that the oil crisis forced Japan to invest in new technology to reduce their dependence on oil and this led to the rapid growth that occurred during the eighties.
The entire period of the eighties had a huge impact on the Nikkei but it was the end of decade when it was most pronounced. During this period Japan became one of the largest economies in the world. This resulted in a rapid rise in the Nikkei as well as in real estate prices. As a result the Nikkei rose six fold during the decade. In 1990 however the real estate bubble burst and the Nikkei lost half of its value in one year.
The next big influence on the Nikkei came in 2001 when interest rates in Japan became effectively zero. This was part of an attempt to stimulate the economy that had been struggling ever since the real estate bubble had burst in the early nineties. By this point the Nikkei had lost nearly eighty percent of its value from its peak. The extremely low interest rates failed to stimulate the economy because it gave the banks no reason to lend money. The result was that the Nikkei went into another sharp dive.
The last major influence on the Nikkei occurred in 2010 when a major earthquake hit Japan. This quake damaged a nuclear power plant and severely disrupted the business of the country. As a result the Nikkei which had been slowly recovering over the last five years suddenly dropped dramatically. On the day the earthquake the value of the Nikkei fell by ten percent. It has largely remained at this level ever since as the Japanese economy continues to struggle. Nobody is entirely sure when the economy will start to turn around as interest rates remain very low which is doing little to encourage investment.
