Abstract
Riding on the domestic economy’s long-running expansion, current account surpluses and an appreciating yen, and assisted by deregulation of the domestic banking and financial markets, Japan turned into the most solvent nation and the leading financial power of the 1980s. During the meeting of the ad hoc group on the yen/dollar exchange rate (May 1984), which eventually served as a precursor to the Plaza accord, the Japanese Ministry of Finance was told that the yen was undervalued vis-à-vis the dollar inter alia because it was not an international currency. The US Treasury Department was convinced that ‘comprehensive measures to internationalise the yen’ and liberalise Japan’s protected capital market would create more demand for the yen, leading to its appreciation. They contended that improving access of foreign financial firms to the Japanese capital market would enable the yen to reflect more fully its underlying economic strength. In addition, four out of eleven recommendations of the Murchison-Solomon Report, which had a good deal of impact over American professional opinion, related to liberalisation and internationalisation of the yen. It pressed for increased holding of yen reserves by the non-Japanese monetary authorities and a reduction in dollar holdings by the Japanese.1
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© 1993 Dilip K. Das
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Das, D.K. (1993). Transformations in the World of International Banking and Finance. In: The Yen Appreciation and the International Economy. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-12812-9_3
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DOI: https://doi.org/10.1007/978-1-349-12812-9_3
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