A comprehensive study of the Japanese economy, before and after the Plaza Accord agreement, 1985

Abstract

Japan has had a tremendous history regarding its economic imprint on the world through its market style and products. From the time of emperor Meiji, till the modern economic systems, the Japanese went through some of the most interesting periods including the catastrophic loss in World War 2. The period from the second world war till mid-1970s, is often termed as the miracle economy, where Japan outgrew most of the world economies, coming back from the ruins of WW2. This has been accredited to their dynamic changes in markets, industrial investment, labor productivity and exemplar exports. In the following report, we have tried to link various changes in the Japanese economy, to various macroeconomic factors such as exchange rates, Inflation, per capita GDP, exports and policy changes, all leading up to the Plaza accord agreement in 1985. The Plaza accord agreement changed the market and scope of Japanese exports in the world, which would then directly and indirectly affect the bubble economy, ultimately leading to the lost-decade of Japan (1990-onwards). We link various economic policies to the growth and recession, by comparing Japan to other developing and developed economies like Germany, USA, UK, Thailand, South Korea and Brazil, to bring a comparative analysis. We also look into the socio-cultural effects of the rapid growth and policies, which can be linked to the decrease in productivity which would be a factor in the bubble bust. We further expand the scope of the study by incorporating cultural and human development factors into the study, which indirectly affect the sentiment of the long-term deflationary period. Thus, we explore the entirety of the Japanese economy, from its post war miracle period, up until the modern deflationary period, with attenuating the effects of various policies and culture, while using the Plaza Accord agreement a direct as well as a trigger factor leading up to the lost decade for Japan.