While the negative legacy of the asset bubble had been more or less dealt with by the mid-2000s, Japan's potential growth rate, which had been around 4 percent in the early 1990s, dropped to about 1 percent by the late 1990s (Chart 5).
On the price front, the annual rate of change in consumer prices fell into negative territory in 1998 and generally remained negative over the following decade and a half. Against this background, inflation expectations also seem to have declined, although they were not accurately captured in a timely manner.