Multibody problem
The Plaza Accord was an agreement reached on September 22, 1985, during a meeting at the Plaza Hotel in New York City. This meeting involved the finance ministers and central bank governors of the Group of Five (G5) nations: the United States, Japan, West Germany, France, and the United Kingdom. The primary goal of the agreement was to address the United States’ trade imbalance by depreciating the US dollar in relation to the Japanese yen and the German Deutsche Mark.
At that time, the US was experiencing a significant trade deficit, partly due to the strong dollar, which made American exports expensive and imports cheap. The G5 nations agreed to intervene in currency markets to devalue the dollar. As a result, the dollar’s value decreased sharply against the yen and the Deutsche Mark, leading to a more balanced trade situation.
The Plaza Accord had significant economic impacts, particularly on Japan. The rapid appreciation of the yen led to economic challenges, including the “yen shock," and contributed to Japan’s economic bubble in the late 1980s.
I don’t think we’ll see a reversal of what happened between Japan and the US, but the yen will continue to appreciate.
USDJPY monthly
The era of the G5 is over, and it may be time for major adjustments to be made between countries in the G20 and beyond.
The less shocking the better, but