12 October 2025
@AndresAnhtho
The U.S.-Japan trade war of the 1980s, culminating in the Plaza Accord of 1985, offers lessons relevant to the current U.S.-China trade war and its impact on ASEAN trade agreements, including Vietnam’s role.
The text below summarises key lessons from the U.S.-Japan trade war and the terms of the Plaza Accord aimed at reducing Japan’s trade surplus, drawing on insights from our prior discussions on Vietnam's role in ASEAN.
Lessons Learned from the U.S.-Japan Trade War
- Currency Revaluation Has Limited Impact on Structural Trade Imbalances
The U.S.-Japan trade war highlighted that Japan’s trade surplus was driven by structural factors, such as high savings rates, export-oriented industrial policies, and non-tariff barriers, rather than just currency valuation. Despite the Plaza Accord’s success in appreciating the yen, the U.S. trade deficit with Japan persisted due to these deeper issues.
Vietnam’s trade surplus with the U.S. ($105 billion in 2025) similarly stems from structural advantages like low labour costs and FDI-driven exports. Currency adjustments alone won’t resolve trade tensions, as demonstrated by Vietnam’s need for governance reforms to enhance transparency and align with global trade standards, thereby mitigating U.S. tariff risks.
- Currency Interventions Can Trigger Unintended Economic Consequences
The rapid yen appreciation (from ¥242 to ¥120 per USD by 1988) made Japanese exports costlier, contributing to an asset price bubble. Japan’s expansionary monetary and fiscal policies to counter this led to the bubble’s burst, sparking the “Lost Decade” of stagnation. While the Plaza Accord didn’t solely cause this, it set off a chain of events exacerbated by policy missteps.
Vietnam must be cautious of external pressures to revalue the dong, as rapid currency shifts could disrupt its export-led growth. Governance reforms in 2025, like digital trade integration, aim to stabilize Vietnam’s economy against such shocks, but overreliance on FDI and exports mirrors Japan’s vulnerabilities.
- Protectionist Measures Escalate Tensions Without Long-Term Solutions:
U.S. actions, like 100% tariffs on Japanese electronics and semiconductors in 1987, temporarily curbed imports but didn’t address underlying competitiveness gaps. Japan’s concessions, such as voluntary export restraints and market access agreements (e.g., 20% U.S. semiconductor market share), reduced tensions but didn’t eliminate the trade deficit.
The U.S.’s 46% tariffs on Vietnamese goods in 2025 risk escalating trade disputes, similar to Japan’s experience. Vietnam’s governance restructuring, including anti-corruption measures, aims to deflect U.S. criticism of unfair practices, but ASEAN’s fragmented response (e.g., Vietnam’s unilateral tariff talks) weakens collective bargaining, echoing Japan’s isolated concessions.
- Domestic Reforms Are Critical to Mitigate Trade War Impacts
Japan’s failure to implement structural reforms (e.g., reducing import barriers) before the Structural Impediments Initiative (SII) in 1989 limited its ability to adapt to yen appreciation. Post-crisis, Japan’s private sector diversified through overseas investment (e.g., Toyota’s $22 billion in the U.S.) and technological upgrades, which helped maintain global competitiveness.
Vietnam’s 2025 governance reforms—streamlining bureaucracy, enhancing digital trade via the ASEAN Single Window, and improving transparency—are proactive steps to strengthen resilience against U.S. tariffs and Chinese competition. However, ASEAN-wide coordination on non-tariff barriers, as ATIGA emphasizes, is crucial to avoid Japan’s fate of domestic policy delays.
- International Cooperation Requires Strategic Alignment
Japan, as a U.S. ally, faced pressure to sign the Plaza Accord to avoid harsher measures like export controls. Its compliance reflected geopolitical dependence, unlike China’s current resistance to similar deals. The Accord’s mixed success showed that cooperation must balance national interests.
Vietnam’s non-aligned stance and ASEAN’s neutrality allow flexibility but limit leverage against U.S. demands. Governance reforms signal Vietnam’s commitment to global trade rules, but ASEAN’s lack of unity (e.g., Malaysia’s 2025 chairmanship push for cohesion) risks weakening the region’s ability to negotiate collectively, unlike the G5’s coordinated Accord.
The terms of the Plaza Accord aimed at reducing Japan’s trade surplus will help you understand the relevance with lessons learned from this.
Terms of the Plaza Accord to Reduce Japanese Trade Surplus
The Plaza Accord, signed on September 22, 1985, by the G5 (U.S., Japan, West Germany, France, U.K.) at the Plaza Hotel in New York, aimed to address U.S. trade deficits by depreciating the U.S. dollar. Key terms targeting Japan’s trade surplus included:
- Currency Market Intervention and Impact
The G5 agreed to intervene in currency markets to appreciate the Japanese yen (and German Deutsche Mark) against the U.S. dollar. Central banks sold dollars and bought yen, leading to a 50% yen appreciation (from ¥242 to ¥120 per USD by 1988). This made Japanese exports costlier, aiming to reduce Japan’s $50 billion trade surplus with the U.S.
U.S. exports became more competitive, but Japan’s surplus persisted due to structural barriers like import restrictions.[](https://en.wikipedia.org/wiki/Plaza_Accord)
- Monetary Policy Coordination and Impact
Japan pledged to maintain loose monetary policies to support yen appreciation and stimulate domestic demand, reducing reliance on exports. The U.S. is committed to tighter fiscal policies to curb deficits.
Japan’s expansionary policies fueled an asset bubble, contributing to economic instability, while U.S. deficit reduction was inconsistent.
- Trade Policy Commitments
Japan agreed to reduce trade barriers and increase imports of U.S. goods, addressing accusations of “unfair” practices like high tariffs and restricted market access. This laid the groundwork for later agreements like the 1986 semiconductor pact and 1989 SII.
Japan’s market remained challenging for U.S. goods due to cultural preferences and structural issues, limiting deficit reduction.
- Exchange Rate Targets
The Accord set implicit target ranges for currency revaluation, with the yen appreciating significantly within two years. The 1987 Louvre Accord later stabilised rates to halt excessive dollar depreciation.
The yen’s rapid rise disrupted Japan’s export industries, triggering recessionary pressures, while the U.S. saw temporary trade improvements.
Relevance to ASEAN and Vietnam
Currency Risks: Vietnam and ASEAN must avoid Japan’s fate of rapid currency appreciation, which could disrupt export-led growth. Vietnam’s governance reforms, like digital trade systems, aim to diversify economic drivers, but ASEAN’s exposure to Chinese imports via RCEP mirrors Japan’s post-Accord vulnerabilities.
Trade Policy Coordination: The Plaza Accord’s coordinated approach contrasts with ASEAN’s fragmented response to U.S. tariffs. Vietnam’s unilateral negotiations echo Japan’s concessions, risking regional cohesion under ATIGA.
Structural Reforms: Vietnam’s 2025 anti-corruption and transparency measures reflect Japan’s later SII efforts to align with global norms. However, ASEAN must accelerate ATIGA’s non-tariff barrier reductions to counter U.S. protectionism, learning from Japan’s delayed reforms.
Geopolitical Strategy: Unlike Japan’s U.S. alignment, Vietnam’s non-aligned stance and ASEAN’s neutrality require strategic diplomacy to resist Plaza-like agreements. Malaysia’s 2025 ASEAN push for unity could strengthen this, but internal divisions persist.
Conclusion
The U.S.-Japan trade war and Plaza Accord teach that currency interventions and protectionism offer short-term fixes but risk long-term economic damage, as seen in Japan’s Lost Decade. Structural reforms and diversified trade strategies are critical, as Vietnam’s 2025 governance restructuring demonstrates.
For ASEAN, Japan’s experience underscores the need for unified trade policies under ATIGA to counter U.S.-China trade war pressures. The Accord’s terms—currency intervention, monetary coordination, and trade commitments—partially reduced Japan’s surplus but at a high cost, a cautionary tale for Vietnam and ASEAN navigating today’s trade landscape.
As for my interest, I will continue to explore the Vietnamese-Japanese comparative values under new post. Let's keep in touch.
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