In the late '80s, corporate America lived in fear of being swallowed up by "Japan, Inc..."

That's what pundits called Japan's post-World War II era of development. It began in 1949... when Tokyo created the Ministry of International Trade and Industry ("MITI").

The ministry's goal was to modernize and advance Japan's economy. MITI worked directly with the Bank of Japan to manage trade and guide investment in sectors deemed "strategic."

It worked. For more than 30 years after the war, Japanese government and business moved in lockstep. This threatened the world order and led to an incredible boom in Japanese stocks.

A brutal multidecade bust eventually followed. But now, Japanese stocks have been hitting new highs again. And the current bull market has plenty of room to run...

As Japan rapidly modernized, the Western world looked on with anxiety...

By the 1970s, investors saw MITI as a challenge to American dominance. And specifically, Americans saw its economic model as having an unfair trade advantage compared with the free market.

In 1985, a feature in New York Times Magazine called Japan's boom "one of history's most brilliant commercial offensives," complaining...

MITI defines strategies; Japanese private enterprise follows through with zest. No better marriage of government planning and private enterprise has ever been seen.

In 1987, the "Japanophobia" grew even more heated. Famously, several U.S. congressmen took to the U.S. Capitol lawn to destroy a Japanese-made radio with sledgehammers in protest of the nation's policies.

Take a look...

This photo may look absurd in hindsight. But at the time, America's economic anxieties seemed pretty darn reasonable.

By 1989, 32 of the world's 50 largest companies were Japanese. And nine of those were Japanese banks – because the nation's asset prices were so bloated.

In a word, it was a bubble... one that couldn't last.

"Japan, Inc." finally peaked on December 29, 1989. The bubble burst. And the Nikkei 225 Index languished... for decades. Take a look...

The Nikkei 225 didn't reclaim its 1989 peak for a generation. Japanese investors know this period of stagnation as the "Lost Decades."

All the fear and media hype about Japan's economic dominance came to nothing. It melted away with one of the biggest financial bubbles in human history. And the damage to stocks didn't heal – until 2024...

The Nikkei 225 hit all-time highs this year. Japan's share prices are riding high again. But here's the thing...

This time, it's a bull market – not a bubble.

A repeat of the Lost Decades isn't in the cards. The investment landscape is just too different today compared with 1989...

For one, the Nikkei 225 is a much leaner index. Only one company in the index is in the top 50 global companies by market cap – Toyota Motor. Again, that's a far cry from the 32 Japanese businesses that dominated the top 50 companies of 1989.

In fact, a large portion of the Nikkei 225 trades for less than book value today...

Book value is a measure of a company's total assets minus its liabilities. It tells us roughly what the company would be worth if it were liquidated tomorrow.

Today, a full 40% of Japanese stocks are trading for less than the value of their assets. So if there's an asset bubble anywhere in the world, it's not in Japan.

In short, Japanese stocks have emerged from the Lost Decades – without heading back into danger. MITI is now long gone. And the market's rise to all-time highs is a strong, fundamentals-driven rally.

It has been more than 15 years since the Nikkei 225 found its long-term bottom. Now, it's soaring again. But don't assume the rally is over. This market has plenty of room to run.

Good investing,

Sean Michael Cummings