The Plaza Agreement and Japan: Reflection on the 30th year Anniversary
The Plaza Agreement, followed by the Louvre Agreement, is remembered as one of the most significant events in the history of international finance in the post WW-II era. Witness accounts show that Japan was more than willing participant of the Plaza Agreement, being prepared to accept yen appreciation. The objective of the Plaza Agreement, depreciation of the dollar, was achieved mush faster than expected, with less intervention amounts than expected. Hover, the yen appreciated to the level that Japan was not comfortable. The Japanese and US authorities agreed in late 1986 in that the yen has appreciated enough. The Louvre Agreement was struck to stabilize the exchange rates at around “current” level. The Louvre Agreement broke down eventually, but how long it lasted is debatable. There are widely different views among policy makers and academics in Japan on how the Plaza-Louvre Agreements and their impacts on the Japanese economy. Some regard it as a symbolic event that Japan firmly secured a seat in international economic policy coordination that would be led by Group of Five (G5) nations. Some regard it as a trigger for the long run trend of yen appreciation for the next 10 years. Some look back to the Plaza as a bad example of international policy coordination that distorted domestic monetary policy.
This working paperﾠis one of a series submitted for the Oct. 1, 2015, Baker Institute event "Currency Policy Then and Now: 30th Anniversary of the Plaza Accord."