WHAT IS Dojima Rice Exchange

The Dojima Rice Exchange was the world's first commodity futures exchange. It was established in 1697 in Osaka, Japan, by samurai who sought to control the rice markets, and it was dissolved in 1939. Its heir is the Osaka Dojima Commodity Exchange, or ODE.

BREAKING DOWN Dojima Rice Exchange

In early Japan, commodities were exchanged on the Dojima Rice Exchange prior to currency being developed. Workers paid their taxes in rice. Feudal lords ran stores for the rice collected at ports where rice receipts were used to conduct purchases and sales. Receipts also were generated against the upcoming harvest, and these were the first futures contracts. They were called empty rice contracts since there was no physical ownership of rice.

Commodity trading in Japan

Today, commodity futures are contracts obligating the buyer to purchase a basic good such as rice, wheat or corn, at a certain date and price in the future. Commodity futures are often settled in cash and are traded on Japan’s exchanges such as ODE and the Tokyo Commodity Exchange, Inc. Transactions executed on trading floors and through electronic networks.

Commodity exchanges initially were established in Japan in 1950 by the Commodity Exchange Law. The Osaka Grain Exchange, precursor of the Kansai Commodities Exchange, was established in 1952. Aiming to rebuild the pre-war Dojima Rice Exchange, the Osaka Grain Exchange listed cereals after the deregulation of starch and legumes in 1951 but did not begin to trade rice until much later. Over the next 40 years, the Osaka Grain Exchange expanded commodity distribution as an exchange for fair pricing and hedging risk in transactions. To increase economy of scale, the Osaka Grain Exchange, Osaka Sugar Exchange and Kobe Grain Exchange merged into the Kansai Agricultural Commodities Exchange in October 1993. This exchange then merged with the Kobe Raw Silk Exchange in April 199 and changed its name to the Kansai Commodities Exchange, or KEX. KEX continued to be based in Osaka, the birthplace of Japan’s first commodity exchange.

It listed the Corn 75 Index on Japan’s first agricultural products and feed index market in 1998, Non-GMO soybeans in 2000, the Coffee Index in 2001, and Frozen Shrimp on Japan’s first marine products market in 2002. KEX merged with the Fukuoka Futures Exchange on 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 runs three morning and three afternoon sessions to trade and establish contract prices.