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.

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