In this regard, by way of pushing down long-term real interest rates, the cumulative policy effects already have firmly taken hold in Japan's economy, as especially evident by the following developments: (1) the output gap in Japan recovered to a more or less neutral level at around the end of 2013 and has generally stayed at this level; and (2) the gap has narrowed between the actual inflation rate and the medium- to long-term expected rates of inflation, on which basis firms and households carry out their economic activities.
In contrast, home prices dipped only 2 percent in the early 1990s downturn, and they did not decline at all in the early 1980s recession. The recent drop in housing market activity also has been dramatic. Home sales plunged more than 50 percent from peak to trough, while housing starts plummeted more than 75 percent.