Wasn't there a point where the Japanese cut their interest rates to zero percent and the real estate market nevertheless continued to fall?
If you want to learn more about why the Japanese housing market never recovered just take a look at the tax liability on any capital gains realized from a sale. It's staggering and effectively kills any motivation to sell.
Also, a 0% interest rate was actually too high because the economy was contracting.
While there are a few similarities, I never like to compare what happened to the Japanese, to what goes on in the US.
They have very different ways of doing business over there and how their banks operate. A person or business can have the worst credit in the world, but if they have the right political contacts, they can get whatever loans they want. Most European and US banks have found it impossible to setup shop there and succeed or buy major interests in the japanese banks and bring some western style banking practices in.
Japans problems started with years of trade and financial manipulation against the US. It slowly but surely inflated the value of the yen against the dollar to obscene amounts. This let them go on major shopping sprees gobbling up real estate all over the US, even when what they were obscenely over paying. The banks were pressured to hand out these loans. When I was living on Oahu throughout all this, for a couple years, we would get knocks on our doors by japanese people. There would be a white limo parked on the street and some translator who would ask us if we would like to sell our house. The offers would be atleast 10 to 20 percent above resonable market prices. One Japanese businessman, I remember his last name was Kawamoto, probably bought over 100 homes in our suburb within a year by doing this.