A Study On The Monetary Policy Of Japan After The "Plaza Accord" And The Implications For China

In the mid-1980s, Japan used expansionary monetary policy in response to the impact of Yen appreciation after the"Plaza Accord". However, excess liquidity prompted a sharp rise in asset prices, Japan entered a bubble-economic period. Then the Japanese government implemented a tight monetary policy to control the economic bubble, as a result, the housing market as well as the stock market crashed. In the period of economic recession, Japanese government implemented an expansionary monetary policy again and lowered the interest rates, but still failed in stimulating the economy.Nowadays, the situation of China is similar with Japan around the1980s. With high economic growth and trade surplus, China endures increasing international pressure. What is more, there may be some bubbles in Chinese economy. We can get some experiences from Japan through analyzing the effectiveness of Japan’s monetary policy.The main contents of this paper include the following five parts:The first part is the introduction part, which mainly describes the background of the article and the literature review. The second part mainly summarizes the background and main impacts of the "Plaza Accord". The third part describes the monetary policies taken by the Japanese government after the "Plaza Accord" in the bubble-economic period and the depression period of Japan, and summarizes the characteristics of its monetary policies. The fourth part tests the effectiveness of monetary policy by using empirical model and studies the reasons for the failures of Japanese government. The last part summarizes the implications for China from Japan.Japan’s monetary policies after the "Plaza Accord" was invalid both in the bubble-economy period and the depression years based on the study. We can also draw the conclusion that China should learn lessons from Japan’s experiences. The monetary policies should be steady to avoid severe impacts on the economy. In order to keep the independence of the monetary policies, we need to create a more effective exchange rate system. And also attention should be paid on the asset prices to avoid the bubbles of our economy. What is more, government should promote the marketization of interest rate to maintain the effectiveness and flexibility of the monetary policies.