What the Plaza agreement meant for the United States was a devalued currency. U.S. producers are returning to profitability due to favourable exchange rates abroad, an export regime that has become fairly profitable. A high U.S. dollar means that U.S. producers cannot compete with cheap imports from Japan and European countries at home, because these imports are much cheaper than what U.S. producers can sell under their profitability agreements. The historic 1985 plaza agreement, signed at the Plaza Hotel in New York, was a growth agreement signed by West Germany, France, the United States, Japan and the United Kingdom. The objective was to force the United States to devalue its currency because of a current account deficit which, in accordance with point 6 of the agreements, is approaching about 3% of GDP. More importantly, European countries and Japan have experienced huge current account surpluses and negative GDP growth, threatening foreign trade and GDP growth in their home countries. Although not all promises have been kept – the US public deficit has never been addressed and trade with Japan remains very loss-making – the Plaza agreement has proved to be a spectacular success.

A second agreement, the Louvre Agreement, was signed in 1987 to put an end to the continued fall of the dollar. One of the unintended consequences of the Plaza agreement was that it led Japan to increase its trade and investment with East Asia, making it less dependent on the United States. In this second agreement, the Italian and Canadian finance ministers were invited, Canada agreed, but Italy declined the invitation. The United States and Japan reiterated the same federal deficit and monetary policy commitments. The Plaza Agreement is a 1985 agreement between the G5 countries – France, Germany, the United States, the United Kingdom and Japan – to manipulate exchange rates by devaluing the U.S. dollar against the Japanese yen and the German mark. To avoid a trade war, the United States, Japan, West Germany, France and the United Kingdom signed an agreement on the Plaza Agreement at the Plaza Hotel in New York in 1985. They agreed to intervene in the foreign exchange markets to reduce the value of the dollar by selling dollars. It worked, the dollar depreciated by 50% over the next two years. Thus, the Plaza agreement helped spread the “lost decade” in Japan. The agreement did not help reduce the trade deficit between the United States and Japan, although it reduced the U.S. deficit relative to other countries.

This is the fact that U.S. products were now able to compete better in international markets, but Japanese import restrictions have always been difficult for U.S. products. signed in September 1985 at the Plaza Hotel in New York, between France, West Germany, Japan, the United States and the United Kingdom, to devalue the us dollar against the Japanese yen and the German mark by intervening in the foreign exchange markets. The U.S. dollar depreciated considerably from the date of the agreement, until it was replaced by the Louvre agreement in 1987. [1] [2] [3] Its main objective was to increase the competitiveness of U.S. and European exports through monetary control relative to Japanese exports. The Plaza Agreement was an agreement signed by the finance ministers of the G5 countries – the United States, the United Kingdom, Japan, West Germany and France – on September 22, 1985 at the Plaza Hotel in New York. This video explains why, in the 1980s, the U.S. dollar appreciated so strongly against the German mark and the yen, which was great for Japanese and German exports, but bad for the U.S. economy.

The Plaza Accord was followed by a devaluation of the dollar. The Plaza agreement was successful in its main objective: to reduce the value of the U.S. dollar, particularly against the Japanese yen and the German Western mark. (Image: businessinsider.com data) The signing of the Plaza agreement had a profound impact on Japan, which led to the Japanese asset price bubble in the late 1980s.