Reference News Network September 23 report: The website of the Japan Times published an article titled "40 Years After the Plaza Accord, Japan Still Constrained by Exchange Rate Volatility" on September 21. The following is a summary of the content:

The current inflation dilemma in Japan is triggered by the continuous rise in the prices of imported goods, but some reasons can be traced back to 40 years ago. At that time, due to concerns about a strong yen, the Japanese government formulated a series of policies after the Plaza Accord caused a rapid appreciation of the yen.

According to the Plaza Accord reached on September 22, 1985, Japan, the United States, the United Kingdom, France, and then West Germany jointly intervened in the foreign exchange market to drive down the US dollar, aiming to boost the American economy, which was suffering from a huge trade deficit at the time.

This year marks the 40th anniversary of the signing of the agreement. At that time, the finance ministers and central bank governors of the Group of Five countries, including former Japanese Finance Minister Tanaka Noboru and former Bank of Japan Governor Tsuda Tomio, jointly finalized this agreement.

Initially, the monetary authorities expected the yen to appreciate relatively modestly against the US dollar. Hiroshi Yuki, who once served as Director of the International Finance Bureau of Japan, said: "We had expected the yen to appreciate by 10% to 15%."

However, the yen's exchange rate surged sharply. Before the signing of the agreement, the exchange rate was approximately 240 yen to 1 US dollar. By the end of 1987, this rate broke through 130 yen to 1 US dollar.

Since the Japanese economy is export-oriented, the sharp appreciation of the yen severely hit many Japanese export companies. The Bank of Japan cut interest rates five times between 1986 and 1987 to cope with the impact of the agreement on the economy.

But this excessive monetary easing gave rise to speculative transactions in the stock and real estate markets, eventually leading to Japan's notorious "bubble economy." Later, when the asset bubble burst, Japan's economy fell into a state of low growth and deflation known as the "lost 30 years."

In 2008, the collapse of the US investment bank Lehman Brothers triggered a global financial crisis, and the yen, as a safe-haven currency, was bought in large quantities, pushing the yen's exchange rate to a significant high.

In 2011, an earthquake and tsunami struck northeastern Japan, and the exchange rate of the yen against the US dollar reached as high as 75.32 yen to 1 US dollar, the highest level since the end of World War II.

At the end of 2012, former Prime Minister Shinzo Abe formed his second cabinet and pledged to implement "Abenomics," a combination of economic policies aimed at stimulating inflation. Previously, the public criticized the Bank of Japan for not being sufficiently loose with its monetary policy, which led to a strong yen.

In April 2013, the Bank of Japan implemented an unprecedented monetary easing policy, purchasing large amounts of Japanese government bonds. This pushed the yen lower and caused stock prices to rise.

However, this unconventional monetary easing policy that lasted for 11 years failed to stimulate the Japanese economy, and the country's potential growth rate has remained below 1% for a long time.

A weaker yen has increased the overseas profits of Japanese exporters denominated in yen. However, Professor Masahiro Nishimura of Hitotsubashi University said that the consequence is that Japanese companies "neglected investments in technological development, thereby hindering productivity growth."

A weak yen has exacerbated inflation caused by the pandemic and the Russia-Ukraine conflict, seriously affecting the financial situation of Japanese households.

In 2023, Japan ranked 22nd in nominal per capita GDP in USD among the 38 OECD member states, behind South Korea, which ranked 21st.

The decline in Japan's economic power is becoming increasingly evident. Nishimura warned that Japan is "on the edge of losing its status as a developed country." (Translated by Zhu Li)

Original: https://www.toutiao.com/article/7553176014252180022/

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