From Rice to Money: Japan’s Contribution to the Modern Stock Market

  • So, you think the model for the modern day economies were invented on Wall Street? Or somewhere in London’s venerable financial district? No, in fact, the modern day concepts of stocks, futures markets and financial speculation are based on concepts used by Japanese merchants, in 1698 AD.

    Dōjima Rice Exchange

    As a keen student of Japanese history, I was fascinated to learn that the Dōjima Rice Exchange, located in Osaka, served as the world’s first functional stock market. The rice exchange began in 1698 when it was first given the Shogun’s official seal of approval. Since soldiers, samurai and even the daimyo (feudal lords) were paid in rice, at the time, the rice exchange served as the basic lifeblood of Japan’s financial world and the innovative nature of this financial invention helped to spur Japan’s emerging economy. At its beginnings, it was kind of like a modern-day stock market, based on rice availability, rather than the value of money. Over the years, however, the men of Dōjima innovated even further. They switched to coins, as the central currency for their marketplace, and, eventually, they converted to paper money.

    Dōjima Merchants

    So the modern stock market, which operates based on the value of currencies and the projected value of commodities (like rice) was born. The trading of “futures” (nobemai), which I’ve heard is the most complicated part of stock trading, still serves as the backbone of all modern economies. This complex system of speculation was also invented by the Dōjima merchants, in 1710 — more than 60 years before there was anything like a stock exchange, in Europe.

    Modern Stock Exchange

    In a way, the Dōjima experiment with stock markets was like a miniature testing ground, converting the country of Japan to what would become the modern way of running an economy. Later, of course, this system was adopted by the entire world. Moreover the systems they built stood the test of time. Not only are these systems still in use today, but the Dōjima Rice Exchange, itself, lasted more than 240 years. It was, in the end, absorbed into the Japanese federal Government Rice Agency, in 1939.

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