Dojima Rice Exchange

What Is the Dojima Rice Exchange?

The Dojima Rice Exchange was a commodity futures exchange specializing in rice. Founded in 1697 in Osaka, Japan, the Dojima Rice Exchange is considered the world’s first commodity futures exchange.

Although the Dojima Rice Exchange was dissolved in 1939, it is succeeded by the Osaka Dojima Commodity Exchange (ODE), which remains active to this day.

How the Dojima Rice Exchange Works

During the late 17th century, rice played a very important role in the Japanese economy. At that time, samurai and other officials received their salaries in rice rather than in cash, and many other workers were expected to pay their taxes in rice. This led to early innovations in the Japanese banking system, with banks and de-facto banking institutions allowing their customers to deposit rice and withdraw cash. 

At the same time, rice was and remains a staple of the Japanese diet, creating an abundance of demand for the commodity. In this environment, Japanese merchants began organizing futures contracts in which buyers could purchase rice ahead of time at predetermined prices, eliminating the risk of sudden price increases and allowing them to secure valuable supplies of rice ahead of time. These contracts allowed rice growers to obtain greater security for the sale of their harvest, locking in prices at acceptable levels. 

The legal records establishing these contracts were made and kept at a central location, on the north bank of Osaka’s Dojima river. This central location, at which merchants and traders would regularly congregate, became known as the Dojima Rice Exchange. As the world’s first organized commodities futures exchange, its influence remains with us today through modern exchanges such as the ODE or the Chicago Mercantile Exchange (CME).

Real World Example of the Dojima Rice Exchange

The legacy of the Dojima Rice Exchange is alive and well in Japan. During the 1950s, new commodities exchanges were established in Japan through the passage of the 1950 Commodity Exchange Law. This led to the creation of the Osaka Grain Exchange in 1952, as well as the Kansai Agricultural Commodities Exchange in 1993. 

The Kansai Agricultural Commodities Exchange exchange then went through a series of mergers, the most recent being the Osaka Dojima Commodity Exchange, formed in 2013. Rice continues to be actively traded on the exchange today, alongside soybeans, coffee beans, fish products, and other commodities.