Autopsy of a market failure:The Dojima Japanese rice futures in the early 21st century
Yamamoto, Shuhei
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https://hdl.handle.net/2142/120233
Description
Title
Autopsy of a market failure:The Dojima Japanese rice futures in the early 21st century
Author(s)
Yamamoto, Shuhei
Issue Date
2023-04-10
Director of Research (if dissertation) or Advisor (if thesis)
Serra, Teresa
Janzen, Joe
Department of Study
Agr & Consumer Economics
Discipline
Agricultural & Applied Econ
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
M.S.
Degree Level
Thesis
Keyword(s)
the failure of futures market, rice futures in Japan, batch and continuous trading
Abstract
We investigate the Osaka Dojima Exchange (ODEX) Japanese rice futures market to identify the reasons underlying its failure. In 2021 the Japanese government did not authorize permanent listing of the contract citing the limited participation of handlers and ODEX decided to terminate trading. We evaluate a wide range of market characteristics that influence the success of a commodity futures market. We conclude that the spot market did not meet the requirements for the futures market to be successful. The futures market was further unable to provide some of its most relevant functions effectively. The use of the futures contracts essentially as a forward contract did not facilitate the success of the market either. Coupled with all these issues, political opposition and regulatory uncertainty led to the failure of the market by mid-2021.
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