News
September 22, 2025 marks the 40th anniversary of the Plaza Accord, signed in 1985. The agreement brought together five major economies—Japan, the United States, the United Kingdom, France, and West Germany—to intervene jointly in currency markets. The goal was to weaken the U.S. dollar and help ease America’s massive trade deficit at the time.
At the time, monetary authorities expected the yen to rise only modestly, by around 10–15% against the dollar. Toyoo Gyohten, then Director-General of the Ministry of Finance’s International Finance Bureau, later recalled, “We thought the yen would strengthen only to that extent.”
In reality, however, the yen surged far beyond expectations. Before the agreement, the dollar traded at about ¥240, but by the end of 1987 it had broken through the ¥130 level. For Japan’s heavily export-dependent economy, this rapid appreciation was a severe blow, leaving domestic exporters struggling to cope.
In response to the economic downturn, the Bank of Japan implemented five interest rate cuts between 1986 and 1987, expanding monetary supply to support growth.
Source: nippon.com (Jiji Press)
Background
The Plaza Accord of 1985 was an international agreement among the United States, Japan, West Germany, France, and the United Kingdom to correct the overvalued dollar through coordinated intervention. At the time, Japan’s rapid growth and export competitiveness were fueling trade frictions with the U.S. The accord triggered a sharp appreciation of the yen, which dealt a heavy blow to Japanese exporters.
In an effort to cushion the downturn, the Japanese government and the Bank of Japan loosened monetary policy significantly. The excess liquidity flowed into stocks and real estate, creating an economic bubble. Its collapse in 1991 marked the beginning of what came to be known as Japan’s “Lost Three Decades” of stagnation.
Overseas Reactions
Against this historical backdrop, comparisons are now being drawn between the Plaza Accord and President Trump’s current tariff measures against China. On overseas social media, including Reddit, users debated whether today’s China might be in a position similar to Japan in the 1980s.
Note: Long comments have been summarized.
Lately I’ve been thinking about US tariffs on Chinese products (up to 254%) and China’s retaliation. It reminded me of the 1980s Plaza Accord, when Japan’s rise led the US to push for yen appreciation, hurting Japanese exports and, some argue, leading to stagnation. Obviously China’s case is more complex (tech, geopolitics, supply chains), but maybe the goal is similar: weaken China’s momentum so the US stays on top. Does this comparison make sense, or am I overthinking?
We are economists not psychologists stop trying to get us to tell you what Trump really thinks
Stop trying to figure out how Trump is actually playing 5Dchess.
The poster isn’t asking about Trump’s mindset but about structural parallels between Japan before the Plaza Accord and China today. Sure, there are similarities, but also big differences: Japan and China differ in scale and ambition. The US had friendly ties with Japan but is adversarial with China. Japan is aging but wealthy, while China still has widespread poverty. China’s surpluses come from low household consumption, not because families save a lot. The CCP would resist reforms like those behind the Plaza Accord.
I think you are completely right, US wants a Mar-a-Lago accord where Europe, China and the rest of “high surplus” nations agree to appreciate. Miran, the architect, lays it out in a paper. The tariffs are just a way to create negotiating pressure/leverage:
https://www.france24.com/en/live-news/20250416-the-trump-adviser-who-wants-to-rewrite-the-global-financial-system
Now of course given that everyone knows what the effects were on Japan, NOBODY will agree to this, not even at 5000% tariffs…
This is truly absurd.
Not sure why I am.getting downvoted for highlighting their plan. I think the “huhuh Trump dumb tariffs’” is dangerously underestimating their agenda.
Because it isn’t their plan. There is no evidence that’s what they’re persuing.
Except it is literally in the paper that Stephen Miran wrote.
https://www.hudsonbaycapital.com/documents/FG/hudsonbay/research/638199_A_Users_Guide_to_Restructuring_the_Global_Trading_System.pdf
What more evidence do you need than: A. A plan describing what they will do B. The first steps (tariffs) being implemented. It’s like reading Mein Kampf and then saying Hitler had no plan… Now I don’t agree with the plan, I think it will fail spectacularly, but it is still what they are pursuing. Tariffs aren’t just a Trump obsession out of nowhere.
Trump has a boatload of economic advisors saying different things to justify the tariffs. Based on what we’re hearing publicly and in reports about negotiations, Trump has never brought up devaluing US currency as an objective. On the other hand, we have 25 years of Trump personally talking about the value of tariffs as an end goal in and of themselves.
Not sure denying there’s a plan helps understand the modus. Yes Stephen Miran is one of a bunch, but he and Navarro is very influential “trade czars”. The “Mar-a-lago” accords is not some peripheral concept, it is pretty well reported by financial media if you search it.
Of course Trump never brings it up because he only like “strong” things, as in “dollar strong”. And even mentioning dollar devaluation would wreak havoc in financial markets. The point is not to devalue the dollar, it is to appreciate the currencies of major trade partners, which means dollar isn’t devalued directly but in relative terms towards other currencies (still the same thing). And it isn’t some alien concept as OP points out, it has already been done in the Plaza accords.
p2025 has a section on trade (chapter 26, page 765), that outlines tariffs and they should be used and for what purpose. but basically yeh, use tariffs as a means of leverage for favorable deals. guynourpl “tHeRe Is nO pLaN”
Yes, that’s what the USA is doing. It’s a largely bipartisan effort. In fairness to Obama, he essentially began the pivot to Asia, sending to Clinton to start the building of a coalition. Biden kept most all of Trump’s initial tariffs and stepped up others, the 100% tariff on EV’s as an example.
America is an empire that generally doesn’t tolerate peer competitors. It’s more Real Politik than Economics. Nuked Japan, firebombed Germany, Scuttled the British and French empires, and then bankrupted and fractured the Soviet Union.
But America never challenges Israel….
Trump is America. When you ask “what is America really trying to do” there isn’t a separate entity. No one is secretly guiding things.
Stephen Miran discusses their objectives openly in this video
https://www.youtube.com/live/RMB_OYqV-HE?si=QB1SaeJwnmrElujA
That may well be the goal, but I think the USA has gravely overestimated it own strength. And if that is the goal It has certainly adopted a bizarre strategy to achieving it; launching a worldwide trade war with pretty much every country on earth isolates the US, not China.
Check out the relative GDP sizes using Purchasing Power Parity rather than using currency exchange rates. China has had the largest economy since 2014, reflecting its domestic market. (See the IMF’s comprehensive historical GDP data for all countries; accessible online) Communist Party of China leadership has long anticipated the decline of the US, the rise of China, and an inevitable clash between the two. (See Pillsbury’s “The Hundred Year Marathon” for some insight). CPC may well have the current scenario all gamed out.
Ppp does not show the size of the economy, but the ability for that economy to meet the basic needs of its citizens.
Nominal is better, but overstated the economies with stronger currencies. The reality is somewhere in between.
Just to attack an assumption, but it is generally agreed upon that the Plaza Accords effects on Japan are largely overblown and the reason Japan suffered stagnation is mostly to their declining workforce and poor policies.
The Plaza Accords is a lot more complicated than, “America got scared of Japan and hit them a gotcha to stall or hurt the Japanese economy.” Fundamentally, it was an agreement (pushed initially by the French in the G7 Summit of 1982) to deregulate international markets and stop unfair protectionism by all parties involved—including America.
Just to concentrate on the whole Japan situation at the time, not trying to argue just trying to understand. Its stagnation could be due to ,among other factors, the (asset/financial) bubble popping and lack of proper planning and policy to tackle this. However it’s to my understanding (maybe wrong) that this type of situation had occurred for the first time and the economists didn’t know how to particularly react. Preferring relative stagnation to a recession and unknowns whether after would be a boom or bust. Please correct me if i am wrong or the way of thinking doesn’t really match up.
Japan is still a prosperous country, despite slower growth in their GDP. Japan has an aging population, which affects not only total output but also patterns of consumption. Japan ranks fourth in the world in its use of robotics and automation. This is not limited to the production lines, but everywhere from nursing homes and hospitals to food services. They are able to provide the goods and services needed by their population with relatively fewer young people.
It’s possible there’s a hidden plan, but since such goals would be secret, we can’t know right now. The US government’s contradictory statements could mean either strategy or just incompetence. Until internal records come out, we won’t know what was planned, what was bungling, or what was malicious. For now, the fair answer is “I don’t know.” Some think they’re just idiots with no plan, and that might be true, which is scary—but I hope it’s wrong, because if the US economy is run incompetently, it’ll be bad for everyone.
True. I think they have a simplified idea of the world economy and are setting policies without proper insight then you see them flip flop around, policy on Monday – markets crash , Reversal on Tuesday – markets recover to lower level, New unhinged policy Wednesday, and rinse repeat. Actually hilarious if it didn’t affect the stock market and people’s investments.
Analysis and Insights｜40 Years After the Plaza Accord: Lessons for U.S.-China Trade Tensions
Japan’s Path and Lessons from the Plaza Accord
The 1985 Plaza Accord aimed to reduce the U.S. trade deficit by driving the dollar down and pushing the yen up. As a result, Japan’s export competitiveness collapsed under a surging yen. Combined with the Bank of Japan’s policy mistakes—first excessive easing, then abrupt tightening—this triggered a real estate bubble and its crash, leading to what is now called the “Lost Three Decades.”
From Japan to China: A New Target for U.S. Policy
Today, President Trump’s administration is not pressuring currencies but instead wielding tariffs as its primary weapon, with China in the crosshairs. Unlike Japan in the 1980s, China is the core of global supply chains, making the fallout global in scale. Politically, Japan was a U.S. ally with limited room to resist, while China—under one-party rule—can confront U.S. pressure far more aggressively.
Global Ripple Effects and the Future Outlook
Just as South Korea and Taiwan gained market share after Japan’s decline, today countries like Vietnam and India may benefit from U.S.-China friction. The big question is whether China will repeat Japan’s fate of long-term stagnation—or instead use the challenge to upgrade its industries and grow stronger.
Conclusion｜Will U.S.-China Trade Friction Become a “Second Plaza Accord”?
Forty years on, the Plaza Accord still shapes economic history. The U.S. strategy looks similar: suppressing a rising rival to maintain dominance. But the differences are critical—China is larger, more globally integrated, and politically more resistant.
The Plaza Accord shows that when a hegemon confronts an emerging challenger, the outcome can reshape global markets for decades. Whether today’s tariff war leads to China’s “lost decades” or sparks a new wave of industrial transformation remains uncertain.
