Dear Engr. Waqas, I dont think 2" expansion joint will be sufficient for a building in seismic zone 3. But other things do matter as well for example; how many stories? etc
In ASCE/UBC/Australian codes, seismic separation should be SRSS of inelastic displacements. that is delta = [ (inelastic detla of building 1)² + (inleastic delta of building 2)² ] ^ 0.5
Remember that these delta values should be at the same level. For example if a building is 9 story high and adjacent building 3 story high. You have to calculate expansion joint at level 3 of both buildings.
Ofcourse you need to check expansion joints at all other stories too (Level 2, Level 1 and basements) if displacement on those levels is more than level 3 (due to high seismic weights or anything).
Please also remember that usually in softwares you consider X or -X directions for seismic analysis (and Y / -Y)
take the max from X and -X and multiply it with Cd/I (for ASCE) or 0.7R (for UBC) to calculate seismic movement of that building. Do this for the second building and then SRSS will give you final value.
HTH