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William Pesek

China Tries Japan's Approach to a Stock Bubble

If Beijing doesn't change course, it's heading for a lost decade or two.
Japan's dangerous precedent.

Japan's dangerous precedent.

Photographer: GREG BAKER/AFP/Getty Images

In any discussion of historical precedents for China's ongoing battle with stock traders, Japan's epic "price-keeping operations" deserve pride of place.

In the early 1990s, stock traders started getting spooked by bad debts from Japan's 1980s bubble years. In response, Tokyo marshalled one of history's biggest government-buying sprees to hold the Nikkei stock market above 17,000. Untold billions of yen from national pension funds and postal savings accounts were channeled through the Ministry of Finance into shares, and authorities also clamped down on short selling.