Plaza Accord

The Plaza Accord was a multilateral agreement concluded on September 22, 1985, at the Plaza Hotel in New York City, among the governments of France, West Germany, Japan, the United States, and the United Kingdom. These nations agreed to depreciate the U.S. dollar in relation to the Japanese yen and the German Deutsche Mark by intervening in currency markets.

The agreement aimed to reduce the U.S. current account deficit, which had risen sharply in the early 1980s due to a strong dollar making American exports more expensive and imports cheaper. This imbalance was largely attributed to the Reagan administration's fiscal policies, including tax cuts and increased military spending.

The intervention was largely successful in achieving its immediate goal, as the dollar depreciated significantly against the yen and the mark over the following years. However, the Plaza Accord also had several unintended consequences, including contributing to the Japanese asset price bubble of the late 1980s and early 1990s. Furthermore, it shifted economic power dynamics, prompting other Asian economies to adjust their currency policies and export strategies. The long-term effects of the Plaza Accord continue to be debated by economists and policymakers.