It was a toxic combination that sparked the Asian financial crisis in 1997. The bad news is that same combination–of Federal Reserve monetary tightening and Japanese fiscal tightening–is looming once again. Rewind to March 1997. Then, the Fed’s communications policy bore little resemblance to the current era of transparency, so inevitably some investors were taken aback when the central bank raised the discount rate, the rate at which the Fed lends money to commercial banks, to 5.5% from 5.25% after two years of trimming rates. (Remember, this was before fed funds targeting was in vogue.) One month later, in April ... (full story)