Hit by a devastating housing slump, billions of dollars of subprime losses and rising oil prices, the U.S. economy appears headed for recession, taking Japan down with it. It’s a situation tailor-made for economists to prove their mettle, but will they rise to the challenge?

Only time will tell, but they might stand a chance if they heed the advice of Nomura Research Institute’s chief economist Richard C. Koo in his latest book, “The Holy Grail of Macroeconomics: Lessons from Japan’s Great Recession.” Following up from his groundbreaking 2003 work, “Balance Sheet Recession,” Koo shows how fiscal stimulus — primarily government spending — can help prevent economies from falling into the type of deflationary trap Japan endured in the 1990s.

READ MORE