The Futures Premium and Rice Market Efficiency in Prewar Japan

29 Pages Posted: 13 Jul 2018

See all articles by Mikio Ito

Mikio Ito

Keio University

Kiyotaka Maeda

Fukuoka University

Akihiko Noda

Kyoto Sangyo University

Date Written: August 2018

Abstract

This article studies the interrelation between spot and futures prices in the two major rice markets in prewar Japan from the perspective of market efficiency. Applying a non‐Bayesian time‐varying model approach to the fundamental equation for spot returns and the futures premium, we detect when efficiency reductions in the two major rice markets occurred. We also examine how government interventions affected the rice markets in Japan, which colonized Taiwan and Korea before the Second World War, and argue that the function of rice futures markets crucially depended on the differences in the structure of rice spot markets. Initially the increased volume of imported rice of a different variety from domestic rice disrupted the rice futures markets. Then, government intervention in the rice futures markets failed to improve the disruption. Changes in colonial rice cropping successfully mitigated the disruption, and colonial rice was promoted in order to unify the different varieties of inland and colonial rice.

Suggested Citation

Ito, Mikio and Maeda, Kiyotaka and Noda, Akihiko, The Futures Premium and Rice Market Efficiency in Prewar Japan (August 2018). The Economic History Review, Vol. 71, Issue 3, pp. 909-937, 2018. Available at SSRN: https://ssrn.com/abstract=3212421 or http://dx.doi.org/10.1111/ehr.12608

Mikio Ito (Contact Author)

Keio University

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

Kiyotaka Maeda

Fukuoka University

Fukuoka 814-0180
Japan

Akihiko Noda

Kyoto Sangyo University

Kyoto City
Japan

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