Lessons From The Experience Of Japan And The United States Under Fixed and Fluctuating Exchange Rates

From the early postwar years to August 1971, Japan maintained a fixed exchange rate against the dollar. After August 1971, and particularly after March 1973, both the dollar and the yen were on a fluctuating exchange rate standard, and generally rates were freely fluctuating in both Japan and the U.S. This system of freely fluctuating rates was modified, or changed, in September 1985 when the finance ministers of the five largest economies agreed to intervene to influence exchange parities. The content of the September agreement is unclear, perhaps deliberately so, and it is too soon to evaluate the effects of whatever change occurred.