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President’s Message
Newsletter "SEI WORLD" Vol. 456

Masayoshi Matsumoto President & CEO

30 Years after the Plaza Accord

This year marks the 70th anniversary of the end of the war. The Japanese economy, which was at rock bottom due to defeat in the war when it tried to make a restart, enjoyed rapid growth thanks to the fixed rate system in which an exchange rate of 360 yen to the dollar was set. This boosted the status of Japan as the world’s second largest economy in terms of gross national product (GNP) about 20 years later. Japanese companies overcame many critical difficulties, such as the Nixon Shock, the revaluation of the yen, the transition to the floating rate system, and two oil crises, by thoroughly rationalizing their operations and implementing energy-saving measures and making other necessary efforts. In the 1980s, Japan was highly valued and touted with the catchcry “Japan as No. 1.”

Amid this situation, an accord to coordinate policy in order to correct the appreciation of the dollar was concluded at a meeting held by the Group-of-Five (G5) countries at the Plaza Hotel, New York. This was in September 1985, and was followed by the implementation of a monetary relaxation policy and other measures against the yen’s appreciation, leading to an unprecedented economic boom in Japan. However, this did not last long. It was not until we encountered a sudden economic decline in the 1990s that we realized what we had enjoyed was just an economic bubble.

I was transferred to London in the year the Plaza Accord was concluded. During the following few years, I closely observed the collapse of the Berlin Wall, the democratization of Eastern European countries, and some other dynamic changes in the world’s politics and economics. When the Soviet Union collapsed, I expected that the entire world would adopt capitalism underpinned by the “invisible hand.” The reality was, however, quite different from my expectation. Troublesome problems once hidden by the Cold War system came out from a Pandora’s box, and they still remain in the world, fanning the flames of confusion around the world.

I would like to leave a historic assessment of the Plaza Accord to experts, although there seems to be no problem in insisting that the accord was one of the major turning points in the world’s politics and economics after the end of the Second World War.

Masayoshi Matsumoto President & CEO


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