Dojima Rice Exchange: The First Futures Market


The Dojima Rice Exchange, established in 1697 in Osaka, Japan, is considered the world’s first futures market. The exchange was initially created to standardize and regulate the trade of rice, which was a vital commodity in Japan. In fact, rice accounted for 90% of government revenues in 1716!


The government paid “bannermen” (Samurais working in civil & military administration) with a fixed amount of rice that they then sold on the market for cash. Thus, their income was directly tied to the price of rice, which was very volatile.


To accommodate their needs, merchants developed the concept of rice warehouse receipts, which later evolved into rice futures contracts. Trading in rice contracts began in Osaka, Japan at the Dojima Rice Exchange in the 17th century. These contracts allowed buyers and sellers to agree on a predetermined price for rice to be delivered at a future date. This innovative market mechanism helped reduce the price volatility of rice and laid the foundation for modern futures markets.


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