$$ Crisis: Japanese history holds lessons for U.S. policy makers

If the experience of Japan is any guide, the U.S. Federal Reserve's plans to accept equity as collateral for loans will have little impact on the credit crisis and may even erode the central bank's influence over markets.

While the Bank of Japan tinkered with its collateral policy, the government spent public funds to replenish the capital of debt-laden banks, and that is what ultimately helped pull Japan out of its crisis, analysts said.

The United States, by contrast, has so far declined use taxpayer's money to support troubled institutions, until they were on the brink of collapse.

In one of a series of emergency policy responses to the spiraling credit crisis, the Fed said this week that it would add equities to the types of collateral accepted for emergency loans through one of its credit facilities. It had previously accepted only investment-grade debt securities.

The decision, unprecedented in the Fed's nearly 95-year history, stirs memories in Japan, which suffered a decade of deflation after an asset bubble collapsed in the 1990s in the much the same way as the U.S. housing market imploded last year.

"Broadly speaking, what the Bank of Japan did and what the Fed's doing is the same in that they are expanding eligible collateral," said Izuru Kato, chief economist at Totan Research, a research arm of the Japanese money broker Totan.