What Is the Dojima Rice Exchange?

The Dojima Rice Exchange was the world's first commodity futures exchange. It was established in 1697 in Osaka, Japan, by a group of samurai who sought to control the rice markets, and it was dissolved in 1939. The modern-day iteration of the Dojima Rice Exchange is the Osaka Dojima Commodity Exchange (ODE).

Key Takeaways

  • The Dojima Rice Exchange was the world's first commodity futures exchange.
  • It was established in 1697 and dissolved in 1939; the modern-day iteration of the Dojima Rice Exchange is the Osaka Dojima Commodity Exchange (ODE).
  • Commodity futures contracts are a legal agreement that obligates the buyer to purchase a basic good—such as rice, wheat, or corn—at a specified date and a previously agreed-upon price in the future.

Understanding the Dojima Rice Exchange

Prior to any currency being developed, in early Japan, commodities were exchanged on the Dojima Rice Exchange. At this time, workers paid their taxes in rice. Feudal lords ran stores for the rice collected at ports; rice receipts were used to conduct purchases and sales. Receipts also were generated against the upcoming harvest. (These were the first form of futures contracts.) They were called empty rice contracts because there was no physical ownership of rice.

History of the Dojima Rice Exchange

In the modern era, commodity futures contracts are a legal agreement that obligates the buyer to purchase a basic good—such as rice, wheat, or corn—at a specified date and a previously agreed-upon price in the future. Because some commodities have a significant amount of price volatility or price fluctuations, even over a short period of time, commodity futures contracts have the potential for large gains and large losses. Commodity futures are often settled in cash. They are traded on Japan’s exchanges, such as ODE and the Tokyo Commodity Exchange, Inc. Transactions are executed both on trading floors and through electronic networks.

The first commodity exchanges were established in Japan in 1950 by the Commodity Exchange Law. The Osaka Grain Exchange was established in 1952. Aiming to rebuild the pre-war Dojima Rice Exchange, the Osaka Grain Exchange had listed cereals (after the deregulation of starch and legumes in 1951). However, it did not begin to trade rice until much later.

Over the next 40 years, the Osaka Grain Exchange expanded commodity distribution, acting as an exchange for fair pricing and hedging risk in transactions. In October 1993, the Osaka Grain Exchange, Osaka Sugar Exchange, and Kobe Grain Exchange merged into the Kansai Agricultural Commodities Exchange. This exchange then merged with the Kobe Raw Silk Exchange and changed its name to the Kansai Commodities Exchange (KEX). Japan's first agricultural products and feed index listed the Corn 75 Index in 1998, non-GMO soybeans in 2000, and the Coffee Index in 2001. The Exchange listed frozen shrimp in 2002 on Japan’s first marine products market.

KEX merged with the Fukuoka Futures Exchange in December 2006. Rice futures finally were listed in 2011. After it took over rice futures from the Tokyo Grain Exchange in 2013, it was renamed the Osaka Dojima Commodity Exchange. In 2016, Tokyo Rice, Osaka Rice, and Niigata Koshihikari contracts were listed. Today, the exchange operates three morning and three afternoon sessions to trade and establish contract prices.