The Heisei Era was a turbulent period for Japan's economy. It was marked by protracted stagnation and sluggish growth following the collapse of the bubble boom, which peaked just as the era began in 1989 with the enthronement of Emperor Akihito, who is abdicating at the end of the month. While the economy may be on a more positive note as Heisei ends, structural challenges confronting the economy must be addressed as the top policy priority of the Reiwa Era.

In 1989, Japan accounted for 15 percent of the world's economy; now its share of the global GDP is down to around 6 percent. Japan's per-capita GDP is now in 20th place among 36 OECD members. Its global competitiveness has sharply declined. Leading Japanese companies, which used to dominate global rankings in terms of aggregate value, are now nearly gone from the list.

The bubble boom from the late '80s to the early '90s saw the prices of land and other assets soar. The Nikkei average on the Tokyo Stock Exchange hit its peak in at the end of 1989 — a level that has since never been recovered. The subsequent collapse of the bubble plunged the economy into a long-term decline. The financial sector was saddled with massive amounts of nonperforming loans. The "convoy system" led by the Finance Ministry ensuring that big financial institutions would not fail broke down during the disposal of the bad loans, and the late 1990s witnessed the collapse of major firms like Yamaichi Securities and Hokkaido Takushoku Bank, while some banks like the Long-term Credit Bank of Japan and Nippon Credit Bank were placed under state control.