Japan was home to the first futures exchange market and once among the world’s leading venues, but fortunes have turned against the once great powerhouse. Colin Packham looks at how Japan lost its crown and how the recent Tsunami has impacted on work to restore its fortunes.
The early 18th Century in
Japan was a time of great upheaval. A series of poor harvests
combined with restrictions on trade had led to a collapse in
the price of rice. Rice was essential to Japan not only because
it was the staple food, it was also the commodity by which much
of the population was paid. Riots met the rise in rice prices.
In response, rice brokers on the Dojima Rice Exchange in
Osaka began guaranteeing forward prices of rice. The concept of
futures was born.
For three hundred years, Japan
pioneered the derivatives industry and remained a derivatives
powerhouse right up until the turn of the century. In 2001,
over 118m contracts were traded in the country, representing a
55% share of exchange traded futures and options in Asia and a
3.4% share of the global market.
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