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Market Efficiency and Government Interventions in Prewar Japanese Rice Futures Markets


  • Mikio Ito
  • Kiyotaka Maeda
  • Akihiko Noda


This study analyzes how colonial rice trade in prewar Japan affected its rice market, considering several government interventions in the two rice futures exchanges in Tokyo and Osaka. We explore the interventions in the futures markets using two procedures. First, we measure the joint degree of efficiency in the markets using a time-varying vector autoregression model. Second, we examine many historical events that possibly affected the markets and focus on one event at a time. The degree varies over time within our sample period (1881-1932). The observation, together with historical analysis, leads to the following conclusions. (1) The two major markets in Tokyo and Osaka were nearly efficient. (2) Government interventions involving the delivery of imported rice from Taiwan and Korea often reduced futures market efficiency. Finally, (3) this relationship continued as long as the quality difference between imported and domestic rice existed. The government interventions that promoted domestic distributions of the colonial goods resulted in confusion in the commodity markets, and decreased efficiency of the markets in the metropole.

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  • Mikio Ito & Kiyotaka Maeda & Akihiko Noda, 2014. "Market Efficiency and Government Interventions in Prewar Japanese Rice Futures Markets," Papers 1404.1164,, revised Feb 2017.
  • Handle: RePEc:arx:papers:1404.1164

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    1. Elliott, Graham, 1999. "Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-783, August.
    2. Perron, Pierre & Rodriguez, Gabriel, 2003. "GLS detrending, efficient unit root tests and structural change," Journal of Econometrics, Elsevier, vol. 115(1), pages 1-27, July.
    3. Wakita, Shigeru, 2001. "Efficiency of the Dojima rice futures market in Tokugawa-period Japan," Journal of Banking & Finance, Elsevier, vol. 25(3), pages 535-554, March.
    4. Fama, Eugene F, 1970. "Efficient Capital Markets: A Review of Theory and Empirical Work," Journal of Finance, American Finance Association, vol. 25(2), pages 383-417, May.
    5. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    6. Hansen, Bruce E., 1992. "Testing for parameter instability in linear models," Journal of Policy Modeling, Elsevier, vol. 14(4), pages 517-533, August.
    7. Shigeyuki Hamori & Naoko Hamori & David A. Anderson, 2001. "An Empirical Analysis of the Efficiency of the Osaka Rice Market During Japan's Tokugawa Era," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 21(9), pages 861-874, September.
    8. Hamilton, James D., 1987. "Monetary factors in the great depression," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 145-169, March.
    9. Mikio Ito & Akihiko Noda & Tatsuma Wada, 2016. "The evolution of stock market efficiency in the US: a non-Bayesian time-varying model approach," Applied Economics, Taylor & Francis Journals, vol. 48(7), pages 621-635, February.
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