More than three-quarters of these loans were to companies in fields like real estate, construction and retailing that have been hit especially hard by the collapse of Japan's asset-price bubble in 1990.

This could help the economy through its soft patch; on the other hand, it could feed straight through into financial speculation, asset-price bubbles and higher inflation.

Half a decade has passed since the bursting of a huge asset-price bubble, and the U.S. economy is still depressed.

At some point soon, however, China will have to slam on the policy brakes to avoid an asset-price bubble.

Other economists said Mr. Feldstein's concern about an asset-price bubble seemed out of place when discussing an economy whose main problem is declining prices and demand.

But most economists agree that what they call the mispricing of risk is unsustainable, since it helps create asset-price bubbles - and their inevitable and very costly collapses.

In the late 1980s a massive asset-price bubble developed in Japan.

In his academic research and his best-selling book from 2000, "Irrational Exuberance," he has pioneered the study of asset-price bubbles, which play an increasingly important role in modern economies.

Mopping up after this asset-price bubble has turned out to be much harder because of its greater magnitude," said Mr Kohn in a speech to the Cato Institute in Washington.

"Why has macroeconomic research been so irrelevant and why did central bankers fail to take any concrete action as house- and asset-price bubbles emerged?"