While it was silly and robbed Japanese cars from showing off their full potential versus European cars, I think it made for great stock car racing - the classic Best Motoring. It was like a racing series with the only regulation being 280 PS. EVOs, WRXes, RX7ens, NSXes, Supras etc. all were competitive against each other, and even if some were inherently faster with the same 280 PS, there were slightly souped up versions with suspension improvements, weight reduction, gearing, brakes etc. which leveled the field.
It also encouraged creativity and perfection in all the other aspects of car's performance, other than power.
Later it become too glaringly obvious that 280 PS cars no matter how focused on track they may be, can't keep up with Euro stuff with 400+ PS. And since 90s there have been great strides in engine design and manufacturing, which would widen the gap even more, and the "gentleman's agreement" was abandoned.
There is still a gentleman's agreement of sorts between German car manufacturers to limit the top speed to 250 kph. This is partly just a cost cutting measure, because it gets very expensive to mass produce cars that can be safe above that speed. Just the tyres become expensive.