Tom Holland

Abacus | As US mulls new Plaza Accord, China should learn from Japan’s fate … but not the lesson it thinks

The cause of Japan’s lost decades was not the appreciation of the yen that followed the Plaza Accord.

It was the misguided attempts of the Japanese authorities to resist that appreciation.

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Tom Holland

Published: 6:16am, 24 Feb 2019Updated: 6:16am, 24 Feb 2019

According to a flurry of reports, the trade truce that the United States and China hope to reach over the coming days will include a memorandum on exchange rates.

The Chinese side is said to be prepared to keep the yuan stable against the US dollar. But the word from well-connected sources in Washington is that in private, US officials say they are aiming at something altogether more ambitious.

They are hoping to secure a second Plaza Accord: a new version of the 1985 agreement under which European countries and Japan – especially Japan – agreed to push their currencies higher against the US dollar.

If that is really what the US negotiators are aiming at, they are wise not to say so openly. Chinese policymakers regard the Plaza Accord as a dastardly US ploy to undermine the ascendant Japanese economy.

They blame the 100 per cent rise in the yen over the one-and-a-quarter years after the deal’s implementation for hammering Japan’s export sector and plunging its economy into a “yen revaluation depression” from which it is still struggling to emerge.

Abacus | As US mulls new Plaza Accord, China should learn from Japan’s fate … but not the lesson it thinks

The cause of Japan’s lost decades was not the appreciation of the yen that followed the Plaza Accord. It was the misguided attempts of the Japanese authorities to resist that appreciation.

The cause of Japan’s lost decades was not the appreciation of the yen that followed the Plaza Accord.

It was the misguided attempts of the Japanese authorities to resist that appreciation.