It may sound like a joke, but there were even calculations in the late 1980s that the land value of the Tokyo metropolitan area alone was sufficient to purchase the whole United States. This economic background fostered overconfidence, and increased the aggressive behavior of many economic entities. The second factor was the lack of a sufficiently prudent financial supervision.
Financial institutions considerably increased their lending to the real estate, construction, and nonbank sectors, and loosened their underwriting standards on loans, including collateral evaluation. As a result, the exposures of the financial institutions’ portfolios became extremely vulnerable to fluctuations in land prices. The third factor was the prolonged accommodative monetary policy.