WASHINGTON (MarketWatch) -- The U.S. is in danger of being pushed into the same price-shrinking economy that has been termed the "lost decade" in Japan, a voting member of the Federal Reserve said Thursday.

"The U.S. is closer to a Japanese-style outcome today than at any time in recent history," said James Bullard, the president of the St. Louis Federal Reserve Bank, in a research paper.

Bullard stressed that the Japan-style deflation was not a done deal. It would take more negative shocks to tip inflation lower.

But the St. Louis Fed president spoke of the risks with more clarity than is customary from Fed officials.

"Bullard touched upon the third rail of economics, that the U.S. is in the vicinity of Japan with respect to the recovery," said Dan Greenhaus, chief economic strategist at Miller Tabak.

In his paper, Bullard argued that the best policy option for the Fed to counter the deflation threat is to buy more Treasurys.

He said the Bank of England's recent policy to buy gilts, or British government bonds, has served to push inflation expectations higher.

The Bank of England has purchased 200 billion pounds, or over $300 billion, of assets, and overwhelmingly those purchases have been gilts. The Fed has purchased over $1.4 trillion in housing-related assets. It bought $300 billion in Treasurys in a program completed last fall.

Bullard argued against another policy option, namely lengthening its existing promise to keep rates low for an extended period.

To respond to the deflation threat with a revised promise to keep rates "low for longer" may be counterproductive because it might simply encourage permanent low interest rates, he said.