Author: Ulrich Volz, DIE

Twenty-five years after the initial agreement, a new Plaza Accord has been proposed and currency intervention is again the major issue. While the revaluation of one major currency, the Chinese yuan, has reinvigorated the debate, global imbalances and currency relations remain global problems. Rows over the recent intervention by the Bank of Japan to halt appreciation of the yen have highlighted once more the need for addressing these issues in a cooperative and multilateral framework. Unilateral and uncoordinated intervention, where countries effectively seek to lower the value of their own currency at the expense of other countries’ export competitiveness, clearly carry the danger of triggering a round of beggar-thy-neighbour policies and a protectionist backlash.

However, the prospects for a new Plaza Accord are dim: China will not be willing to give in to pressure from the US and other advanced or emerging economies that form the G20. Read more…

Author: Ulrich Volz, German Development Institute

Japan is again haunted by deflation. While the nation is following the beef bowl price wars between fast food restaurants on television, the prices of consumer goods are falling and households are tightening their purse strings. Concurrently, companies are holding back investment and trying to cut costs to remain competitive.

Last November the Japanese government acknowledged the resurgence of the country’s deflation problem and passed on the buck to the Bank of Japan and pressured it to do something about it. Read more…