Plaza Accord

DEFINITION of 'Plaza Accord'

A 1985 agreement among the G-5 nations (France, Germany, the United States, the United Kingdom and Japan) to manipulate exchange rates by depreciating the U.S. dollar relative to the Japanese yen and the German Deutsche mark. Also known as the Plaza Agreement, the Plaza Accord's intention was to correct trade imbalances between the U.S. and Germany and the U.S. and Japan, but it only corrected the trade balance with the former.

BREAKING DOWN 'Plaza Accord'

The yen and the Deutsche mark dramatically increased in value relative to the dollar. A second agreement, the Louvre Accord, was signed in 1987 to stop the continuing decline of the dollar. An unintended consequence was that the Plaza Accord caused Japan to increase trade and investment with East Asia, making it less dependent on the United States.

RELATED TERMS
  1. Group of Five - G-5

    Name given to the five industrialized nations that meet periodically ...
  2. Japan ETFs

    A type of exchange-traded fund that invests the majority of its ...
  3. Repurchase Agreement - Repo

    A form of short-term borrowing for dealers in government securities. ...
  4. Smithsonian Agreement

    An agreement reached by a group of 10 countries (G10) in 1971 ...
  5. Bundesbank

    The central bank of Germany. The Bundesbank is the U.S. equivalent ...
  6. Power center

    A large (250,000 to 750,000 square ft.) outdoor shopping mall ...
Related Articles
  1. Forex Education

    The Plaza Accord: The World Intervenes In Currency Markets

    In 1985, the G-5 nations signed an agreement to devalue the United States currency and correct the GDP. To an extent, it worked. But there were casualties.
  2. Economics

    Volatility In The Yen Has Brought On Big Changes

    There's a difference between translation effects and the real effects that FX swings bring. We look at the difference, and how it's changing Japan.
  3. Forex Education

    What Forex Traders Need To Know About The Yen

    The Japanese Yen possesses some unique qualities that traders should know before jumping in.
  4. Forex Education

    How Does The Yen Affect American Finance?

    Although it has fallen to number four on the trading partner list, Japan and its currency have a large impact on the American economy.
  5. Forex Education

    America's Loss Is The Currency Market's Gain

    The Smithsonian Agreement hurt the U.S. in the short-term, but was necessary in furthering real market-driven exchange rates.
  6. Investing

    Deutsche Bank Undergoes a Significant Revamp

    The Deutsche Bank's reorganization is being called one of the biggest shake-ups at an investment bank in recent years.
  7. Economics

    3 Economic Challenges Japan Faces in 2016

    Understand the important challenges for Shinzo Abe and the Bank of Japan to help Japan's economy escape deflation in the coming year.
  8. Investing News

    Will Quantitative Easing Be Japan's Savior?

    The quantitative easing program, recently announced by the new governor of the Bank of Japan, Haruhiko Kuroda, is for a cash infusion of $1.4 trillion by the end of 2014. Will it help the Japanese ...
  9. Economics

    Japan's Case Study: Diminished Effects on QE

    Examine more than 25 years of Japanese expansionary policy, both fiscal and monetary, to see why quantitative easing hasn't worked as expected.
  10. Forex Education

    Investopedia's Forex Outlook For March 2012: Other Economies: Japan, Switzerland and U.K.

    Higher Yen Hits Japan's Economy Japan's yen is one of the few Asian currencies that are struggling. After its economy contracted 2.3% during the fourth quarter of last year, the Bank of Japan ...
RELATED FAQS
  1. What is the cost of living difference between the U.S and the U.K?

    Learn how consumers pay, on average, nearly 30 percent more for private goods and services in the United Kingdom than in ... Read Answer >>
  2. Which terms should be included in a partnership agreement?

    Understand what specific terms should be included in a business partnership agreement and how each affects the partners in ... Read Answer >>
  3. What developed countries have the greatest exposure to the automotive sector?

    Learn about the developed countries that have the greatest exposure to the automotive sector, Germany and Japan, which have ... Read Answer >>
  4. How often do exchange rates fluctuate?

    Exchange rates float freely against one another, which means they are in constant fluctuation. Currency valuations are determined ... Read Answer >>
  5. How do you lose money in the Forex market?

    All trades made in the forex market are made in pairs. In other words, one currency is always quoted against another currency, ... Read Answer >>
  6. What are the different ways I can file my income tax return?

    Learn about the potential consequences of violating the terms of a letter of intent, such as breakup fees, damages and agreement ... Read Answer >>
Hot Definitions
  1. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  2. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  4. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  5. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  6. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
Trading Center