Skip to main content

Market efficiency and government interventions in prewar Japanese rice futures markets

  • Mikio Ito (a1), Kiyotaka Maeda (a2) and Akihiko Noda (a3)

This study analyzes how the colonial rice trade in prewar Japan affected its rice market, considering several government interventions in the two rice futures exchanges in Tokyo and Osaka. We explore the interventions in the futures markets using two procedures. First, we measure the joint degree of efficiency in the markets using a time-varying vector autoregression model. Second, we examine historical events that possibly affected the markets and focus on one event at a time. The degree of efficiency varies over time within our sample period (1881-1932). The observation, together with historical analysis, leads to the following conclusions: (1) the two major markets in Tokyo and Osaka were nearly efficient; (2) government interventions involving the delivery of imported rice from Taiwan and Korea often reduced futures market efficiency; finally, (3) this relationship continued as long as the quality difference between imported and domestic rice existed. The government interventions that promoted domestic distributions of the colonial goods resulted in confusion in the commodity markets, and decreased efficiency of the markets in the metropole.

Corresponding author
Corresponding author: A. Noda, Faculty of Economics, Kyoto Sangyo University, Motoyama, Kamigamo, Kita-ku, Kyoto 603-8555, Japan; email:;
Hide All
We would like to thank the editor, Stefano Battilossi, three anonymous referees, Shigehiko Ioku, Junsoo Lee, Kris Mitchener, Chiaki Moriguchi, Tetsuji Okazaki, Minoru Omameuda, Rainer Schüssler, Masato Shizume, Yasuo Takatsuki, Tatsuma Wada, Wako Watanabe and Asobu Yanagisawa for their helpful comments and suggestions. We would also like to thank seminar and conference participants at Wakayama University, the Japanese Economics Association 2014 Spring Meeting, the 84th Annual Conference of the Socio-Economic History Society and the 89th Annual Conference of the Western Economic Association International for helpful discussions. We also thank the Japan Society for the Promotion of Science for their financial assistance as provided through the Grant in Aid for Scientific Research nos. 26380397 (Mikio Ito), 26780199 (Kiyotaka Maeda) and 15K03542 (Akihiko Noda). All data and analysis codes used for this study are available on request.
Hide All
Bank of Japan (1957). Meiji 22-nen Nihon Ginko tokei nenpo [1899 statistical yearbook of Bank of Japan]. In Bank of Japan, Nihon kinyuushi shiryo Meiji-Taisho hen dai 19 kan [Materials on Japanese financial history in the Meiji-Taisho period, vol. 19]. Tokyo.
Bank of Japan, Research and Statistics Department (1987). Meiji iko oroshiuri bukka shisu tokei [Hundred-year statistics of wholesale price indexes in Japan]. Tokyo.
Ministry of Agriculture and Commerce (1900). Dai 15-kai noshomu tokei sho [The 15th statistical yearbook of agriculture and commerce]. Tokyo.
Ministry of Agriculture and Commerce, Agricultural Bureau (1914). Kome ni kansuru chosa [Research report on the rice market]. Tokyo.
Ministry of Agriculture and Forestry, Department of Agriculture (1932). Showa 6-nen kome tokeisho [1931 Directory of rice statistics]. Tokyo.
Ministry of Agriculture and Forestry, Rice Bureau (1935a). Osaka seisan kome gengetsubetsu ichidaihyo [Trading volume and price in Osaka-Dojima rice exchange]. In Beikoku torihikijo kankei syorui 3 [Official documents recording the policies of rice exchanges, vol. 3], Tsukuba: Archives of Tsukuba Office, Agriculture, Forestry and Fisheries Research Council Secretariat, Ministry of Agriculture, Forestry and Fisheries.
Ministry of Agriculture and Forestry, Rice Bureau (1935b). Seifumai no kaiire uriwatashi no jiki oyobi suryo narabini seifumai genzaidaka [The volume of buying, selling, and stock by the government]. In Beikoku torihikijo kankei syorui 2 [Official documents recording the policies of rice exchanges, vol. 2], Tsukuba: Archives of Tsukuba Office, Agriculture, Forestry and Fisheries Research Council Secretariat, Ministry of Agriculture, Forestry and Fisheries.
Ministry of Agriculture and Forestry, Rice Bureau (1935c). Tokyo seisan kome gengetsubetsu ichidaihyo [Trading volume and price in Tokyo rice exchange]. In Beikoku torihikijo kankei syorui 3 [Official documents recording the policies of rice exchanges, vol. 3], Tsukuba: Archives of Tsukuba Office, Agriculture, Forestry and Fisheries Research Council Secretariat, Ministry of Agriculture, Forestry and Fisheries.
Ministry of Agriculture and Forestry, Rice Bureau (1937). Beika oyobi beikoku nisshi [Daily record of rice prices]. Tokyo.
Ministry of Agriculture and Forestry, Rice Bureau (1938). Osaka-fu ni okeru gaichimai no torihiki jijo ni kansuru chosa [Report on the transaction of foreign rice in Osaka prefecture]. Tokyo.
Ministry of Finance, Financial Bureau (1919). Meiji nenkan beika chosei enkaku shi [History of rice price adjustment in the Meiji period]. Tokyo.
Osaka-Dojima Rice Exchange (1934). Gyomu kitei [Operating rule]. Osaka.
Tokyo Asahi Shimbun (1898). Honnen mugisaku no koukyo [Forecast of barley cropping this year]. Tokyo Asahi Shimbun, 5 May 1898.
Tokyo Asahi Shimbun (1912). Beika chosetsu to seifu [Control the rice price and the government]. Tokyo Asahi Shimbun, 5 June 1912.
Tokyo Asahi Shimbun (1920). Beika hikiage mondai [Raising the rice price]. To kyo Asahi Shimbun, 26 September 1920.
Tokyo Asahi Shimbun (1926). Ukewatashimai no kakushita hanni [Grade of rice for delivery in the exchanges]. To kyo Asahi Shimbun, 17 December 1926.
Tokyo Keizai Zasshi (1890a). Gaikokumai wo tatemai to nasukoto ni taisuru Tokyo kaimai tonya kumiaiin no giketsu [Resolution opposing the amendment to the transaction rule regarding the delivery of imported rice by the members of the Tokyo Rice Wholesalers Association]. To kyo Keizai Zasshi [Tokyo Economist], 21, 3 May 1890, p. 577.
Tokyo Keizai Zasshi (1890b). Gaikokumai yunyu no keikyo [State of rice imports]. To kyo Keizai Zasshi [Tokyo Economist], 22, 26 July 1890, p. 122.
Tokyo Keizai Zasshi (1890c). Osaka kome shokaisho mousiawase kisoku no ninka wo torikeshisaru [Revocation of permission to deal in the Osaka-Dojima rice exchange]. Tokyo Keizai Zasshi [Tokyo Economist], 21, 26 April 1890, p. 537.
Tokyo Rice Exchange (1934). Gyomu kitei [Operating rule]. Tokyo.
Toyo Keizai Shimpo Sha (1927). Meiji taisho kokusei souran [Japanese statistical survey in Meiji and Taisho eras]. Tokyo.
Yomiuri Shimbun (1898a). Gaikokumai no teitai [The stopping of imported rice distribution]. Yomiuri Shimbun, 1 May 1898.
Yomiuri Shimbun (1898b). Kimai 10 en-dai ni ochin [Rice futures price falls to the 10-yen level]. Yomiuri Shimbun, 7 July 1898.
Yomiuri Shimbun (1898c). Taiwanmai ukewatashi no kuzyo [Complaint against the delivery of Taiwanese rice]. Yomiuri Shimbun, 2 August 1898.
Awokuse T. O. and Yang J. (2003). The informational role of commodity prices in formulating monetary policy: a re-examination. Economics Letters, 79, pp. 219–24.
Bhar R. and Hamori S. (2008). Information content of commodity futures prices for monetary policy. Economic Modelling, 25, pp, 274–83.
Blank S. C., Carter C. A. and Schmiesing B. H. (1991). Futures and Options Markets: Trading in Financials and Commodities. London: Prentice Hall.
Colling P. L. and Irwin S. H. (1990). The reaction of live hog futures prices to USDA hog and pigs reports. American Journal of Agriculture Economics, 72, pp. 8494.
Elliott G., Rothenberg T. J. and Stock J. H. (1996). Effcient tests for an autoregressive unit root. Econometrica, 64, pp. 813–36.
Fama E. F. (1970). Efficient capital markets: a review of theory and empirical work. Journal of Finance, 25, pp. 383417.
Frenkel J. A. (1980). Exchange rates, prices and money: lessons from the 1920s. American Economic Review, Papers and Proceedings, 70, pp. 235–42.
Goss B. A. (1987). Wool prices and publicity available information. Australian Economic Papers, 26, pp. 225–36.
Hansen B. E. (1992). Testing for parameter instability in linear models. Journal of Policy Modeling, 14, pp. 517–33.
Hansen L. P. and Hodrick R. J. (1980). Forward exchange rates as optimal predictors of future spot rates: an econometric analysis. Journal of Political Economy, 88, pp. 829–53.
Hishimoto C. (1938). Chosenmai no kenkyu [The study of Korean rice]. Tokyo: Chikura Shobo.
Hori K. (2009). Higashi Azia shihonsyugi shi ron [History of capitalism in East Asia]. Kyoto: Minerva Shobo.
Ichinohe M. (1920). Beikoku torihiki jijo oyobi toukei [The system and statistics of rice trading]. Tokyo: Yumei Sha.
Ito M., Noda A. and Wada T. (2014). International stock market efficiency: a non-Bayesian time-varying model approach. Applied Economics, 46, pp. 2744–54.
Jacks D. S. (2007). Populists versus theorists: futures markets and the volatility of prices. Explorations in Economic History, 44, pp. 342–62.
Kataoka Y. (2004). Kokurui no seisan to ryutsu [Production and distribution of crops]. In Matsumoto T. (ed.), Seisan to ryutsu no kindaizo [Image of modern production and distribution] . Tokyo: Nippon Hyoron Sha, pp. 122–35.
Kaufmann P. J. (1984). Handbook of Futures Markets: Commodity Financial Stock Index, and Options. New York: Wiley.
Kawai Y. (1921). Torihikijo kouwa [Lectures on exchange]. Tokyo: Nitorisha.
Lim K. P. and Brooks R. (2011). The evolution of stock market efficiency over time: a survey of the empirical literature. Journal of Economic Surveys, 25, pp. 69108.
Lo A. W. (2004). The adaptive markets hypothesis: market efficiency from an evolutionary perspective. Journal of Portfolio Management, 30, pp. 1529.
LO A. W. (2005). Reconciling efficient markets with behavioral finance: the adaptive markets hypothesis. Journal of Investment Consulting, 7, pp. 2144.
Lo A. W. (2012). Adaptive markets and the new world order. Financial Analysts Journal, 68, pp. 1829.
Ministry of Agriculture and Forestry (1959). History of Agricultural and Forestal Administration, vol. 4. Tokyo.
Mochida K. (1970). Beikoku shijo no tenkai katei [The development of the rice market]. Tokyo: University of Tokyo Press.
Nakazawa B. (1933). Nihon beika hendo shi [History of rice price fluctuations in Japan]. Tokyo: Kashiwa Shobo.
Neely C. J., Weller P. A. and Ulrich J. M. (2009). The adaptive markets hypothesis: evidence from the foreign exchange market. Journal of Financial and Quantitative Analysis, 44, pp. 467–88.
Newey W. K. and West K. D. (1987). A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix. Econometrica, 55, pp. 703–8.
NG S. and Perron P. (2001). Lag length selection and the construction of unit root tests with good size and power. Econometrica, 69, pp. 1519–54.
Noda A. (2016). A test of the adaptive market hypothesis using a time-varying AR model in Japan. Finance Research Letters, 17, pp. 6671.
Okubo T. (2007). Trade bloc formation in inter-war Japan: a gravity model analysis. Journal of the Japanese and International Economies, 21, pp. 214–36.
Omameuda M. (1993). Kindai Nihon no shokuryo seisaku [Food policy in modern Japan] . Kyoto: Minerva Shobo.
Ota K. (1938). Meiji Taisho Showa beika seisaku shi [Rice price policy in the Meiji, Taisho and Showa eras] . Tokyo: Maruyamasha Shoten.
Perkins E. J. (1974). The emergence of a futures market for foreign exchange in the United States. Explorations in Economic History, 11, pp. 193211.
Schaede U. (1989). Forwards and futures in Tokugawa-period Japan: a new perspective on the Dojima rice market. Journal of Banking and Finance, 13, pp. 487513.
Schwarz G. (1978). Estimating the dimension of a model. Annals of Statistics, 6, pp. 461–4.
Shizume M. (2011). Ryotaisenkan-ki ni okeru bukka hendo yoso no keisei: shohin sakimono kakaku deta wo mochiita bunseki [Formulation of expectations in price fluctuation in Japan during the interwar period: an analysis using commodity futures price data]. Shakai Keizai Shigaku [Socio-Economic History] , 77, pp. 2547.
Takatsuki Y. (2008). Kinsei ryoshu-mai chuo shijo no kino: Dojima kome kaisho ni okeru beika keisei no koritsusei [The center of rice trade in Tokugawa Japan: efficiency of the Dojima rice market]. Shakai Keizai Shigaku [Socio-Economic History] , 74, pp. 322.
Taketoshi K. (1999). Meiji kara Showa shoki ni okeru kome sakimono kakaku ni kansuru keiryo bunseki [An econometric analysis of rice futures prices in prewar Japan]. Sakimono Torihiki Kenkyu [Japan Futures Studies] , 4, pp. 125–45.
Tan T. Y. (1992). Event studies of efficiency in the Australian interest rate futures market. Economic Record, 68, pp. 135–40.
Tohata S. and Okawa K. (1939). Chosen beikoku keizairon [The rice economy of Korea]. In Japan Society for the Promotion of Science (ed.), Beikoku keizai no kenkyu [Study of the rice economy] , vol. 1. Tokyo: Yuhikaku, pp. 297446.
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Financial History Review
  • ISSN: 0968-5650
  • EISSN: 1474-0052
  • URL: /core/journals/financial-history-review
Please enter your name
Please enter a valid email address
Who would you like to send this to? *



Full text views

Total number of HTML views: 18
Total number of PDF views: 119 *
Loading metrics...

Abstract views

Total abstract views: 395 *
Loading metrics...

* Views captured on Cambridge Core between 16th February 2017 - 12th December 2017. This data will be updated every 24 hours.