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Employing a new accounting data set we apply the framework of McGrattan and Prescott (2005) to the Japanese economy in order to assess if Japanese stocks were priced correctly in the period after 1980. We find that the stock market tended to undervalue the fundamental value of installed capital. We also provide a new interpretation of Japanese stock market phenomena during the 'bubble period' and suggest that from a theoretical perspective, stock prices during the 'bubble period' were correctly valued. Changes in the reproducible cost of intangible capital play an important role in our new interpretation.