The Plaza and Louvre Accords and Japan’s Balance of Payments Adjustment

The main topics of this chapter are the author’s recollections on the implications for Japanese monetary policy management of the Plaza Accord of 1995 to correct the excessive strength of the US dollar and the Louvre Accord of 1987 to deal with its subsequent excessive fall. It reveals that in the process of the Bank of Japan’s successive cuts in its official discount rate from January 1986 to February 1987, pressure on the Bank to relax its monetary policy came not just from the US government but also from the Federal Reserve Chairman, while the OECD warned about the risk of excessive monetary easing in Japan.