US treasury secretary Timothy Geithner said today that US fiscal policy was about to turn "very aggressive" to battle recession and avoid a slump like Japan suffered in the 1990s.
In an interview with the Wall Street Journal, Mr Geithner said that with new economic stimulus and financial stability plans, the Obama administration is "going to do our best" to apply lessons from Japan's decade-long quagmire after real estate and stock market bubbles burst.
"Certainly monetary policy has been very aggressive, and fiscal policy is about to get very aggressive," Mr Geithner told the newspaper, which published the interview on its website.
Mr Geithner said US policy-makers were slow to realize the depth of the nation's credit crisis and slide into recession.
The US situation "is dramatically worse today because collectively policy makers were a little slow to escalate both on the fiscal side and on the financial side," Mr Geithner said in what the Journal termed a recent interview.
"There was a bit of zigzagging," Mr Geithner said, recounting debates last year about whether inflation or the crisis were bigger risks, whether policy-makers should be "trying to teach people a lesson or save the country?...That made fear and panic worse than it should have been."
Mr Geithner, who responded to the crisis as head of the New York Federal Reserve Bank, is planning to lay out a framework for the Obama administration's response to the economic crisis early next week. The plan is widely expected to include efforts to mitigate home foreclosures, strengthen financial institutions and revamp financial regulation.
He warned of the temptation to shift policy before the economy actually begins to recover. "There's a huge temptation to see the light at the end of the tunnel before it's really there, and therefore to kind of shift back to restraint before you have recovery fully established," Mr Geithner said.