The Plaza Accord was a 1985 agreement among the G-5 nations—France, Germany, the United States, the United Kingdom, and Japan—to manipulate exchange rates by depreciating the U.S. dollar relative to the Japanese yen and the German Deutsche mark.
- The intention of the Plaza Accord was to correct trade imbalances between the U.S. and Germany and the U.S. and Japan, but it only corrected the trade balance with the former.
- The Plaza Accord led to the yen and Deutsch mark dramatically increasing in value relative to the dollar.
- An unintended consequence of the Plaza Accord was that it paved the way for Japan’s “Lost Decade (1991-2001)” of sluggish growth and deflation.
