Plaza Accord

The Plaza Accord was signed on 22 September 1985 at the Plaza Hotel in New York City by finance ministers and central bank governors of the G5: the United States, Japan, West Germany, France, and the United Kingdom. The signatories included US Treasury Secretary James Baker, Japanese Finance Minister Noboru Takeshita, West German Finance Minister Gerhard Stoltenberg, French Finance Minister Pierre Bérégovoy, and UK Chancellor Nigel Lawson.

The accord responded to a sharply overvalued US dollar, which had appreciated roughly 50% against major currencies between 1980 and early 1985. The strong dollar had widened the US trade deficit, hollowed out American manufacturing competitiveness, and fueled protectionist pressure in the US Congress. The participating governments agreed that "some further orderly appreciation of the main non-dollar currencies against the dollar is desirable" and committed to coordinated foreign-exchange intervention to achieve it.

The effects were rapid. Within two years the dollar fell sharply against the yen and Deutsche Mark — the yen roughly doubled in value against the dollar by 1987. Coordinated intervention was later partially reversed by the Louvre Accord of February 1987, which sought to stabilize exchange rates after the dollar's decline had gone further than intended.

The Plaza Accord is frequently cited in debates over:

• Currency manipulation and the legitimacy of coordinated FX intervention.
• The origins of Japan's late-1980s asset price bubble and subsequent "Lost Decade," as the stronger yen pushed the Bank of Japan toward looser monetary policy.
• Calls for a "new Plaza Accord" to address imbalances involving the Chinese renminbi, though Beijing is not part of the G5/G7 framework that produced the original deal.

For IR researchers, the accord is a canonical case of policy coordination under hegemonic leadership and a touchstone in international political economy literature on exchange-rate regimes after Bretton Woods.