KEO Discussion Paper No. 170

Colonial Impact on Japan’s Economy:
Dynamics of the Rice Market during the Interwar Period

Kiyotaka Maeda

Colonial Impact on Japan’s Economy:
Dynamics of the Rice Market during the Interwar Period*
Kiyotaka Maeda†
Keio University

June 2022

Abstract
This study analyzes the change in the pricing of domestic and colonial rice in Japan
during the interwar period. Japan was an empire that had thriving colonial trades to procure
primary products. Colonial rice differed in quality from domestic rice because of climate
conditions, and the government promoted homogenizing various types of rice.
Consequently, colonial rice consumption expanded in Japan, and the pricing of eachheterogeneous rice partially influenced the others after the mid-1930s. The forging of acloser relationship among the regions within the empire structurally transformed not onlycolonial economies but also the metropole’s economy.
Keywords: imperialism, Japanese Empire, primary product, colony, pricing, rice
JEL classification codes: N25, N75*

We acknowledge the Japan Society for the Promotion of Science for its financial assistance as provided
through the Grants-in-Aid for Scientific Research (nos. 21K01617; 20KK0029; 20K01795) andfinancial support received from the Takahashi Industrial and Economic Research Foundation (project
title: Consumption and Distribution of Foods in Modern East Asia and the Japanese Empire).
† Department of Japanese History, Faculty of Letters, Keio University, 2-15-45 Mita, Minato-ku, Tokyo 1088345, Japan; E-mail: k-maeda@keio.jp1

1Introduction

Imperialism cast a shadow across the globe in the nineteenth and twentieth centuries. Under thiscutthroat regime, the colonizers transformed the economic institutions of their colonies in different ways,
and the institutional distinction caused differences in prosperity within the former colonies (Acemoglu,
Johnson, and Robinson. 2001). As a result, colonization cemented the legacy of economic disparity,
which unfortunately remained into the twenty-first century. Japan, the only East Asian country that built
an empire in the modern period, also enlarged economic disparities with its colonies. However, theJapanese Empire had an intriguing feature in that the metropole had a mutual economic dependence on
the colonies based on geographical proximity.
The Japanese colonization did not fit the Western model (Duus 1995, p. 434). Japan did nothave sufficient economic and military capacity to colonize distant locations and so took possession of
its adjacent foreign regions: Taiwan (Formosa) in 1895, Southern Sakhalin in 1905, and Korea in 1910
(Beasley 1987, p. 253). This geographical proximity characterized the economic nature of the Japanese
Empire.
During the interwar period, Japan overwhelmed the Western countries in the component ratioof colonial trade to the total volume of imports and exports, and the Japanese Empire rose to become“the world’s largest empire” at the end of the 1930s (Hori 2004, p. 14; 2011). Japan’s bloc-border effecton the commodity trade surged after the First World War (WWI), and the degree of colonial trade
linkage within the Japanese Empire sustained a high level during the same period (Okubo 2007).
Through this unique colonial trade, Japan utilized its colonies as key suppliers of primary products.
Western European countries also traded with their Asian colonies, and their exports werehigher in the degree of trade linkage than their imports during the interwar period. In brief, Western
powers mainly utilized their Asian colonies as export destinations. By contrast, in Japan, the linkage
degree of both types of trade were almost equal, and primary products held about 70 percent of thecommodities transported from the colonies to Japan (Hori 2009, p. 238; Matsumoto 1996). That is,Japan economically forged and deepened closer mutual relations with its colonies after WWI (Wilson
and Cribb 2018). However, the previous literature does not clarify how the change in the colonial
economies affected the metropole’s economy since it tends to focus only on the one-way relationshipthat the metropole’s activity acted on the colonial societies.
Hori (2004; 2009; 2011), Matsumoto (1996), and Okubo (2007), as we quoted above,scrutinize the trade statistics within the Japanese Empire. Along with these studies, Japanese scholars
explore how an increase in the production of colonial commodities for export to Japan affected thestructure of production and distribution in the colonies (Wakimura 2018). Although they shed light on
the flow of commodities from the colonies as the production areas to the metropole as the destination
for consumption, they do not grasp the change in the metropole’s economy caused by the developmentof closer relationships within the empire.
Nakajima and Okazaki (2018) reveal that the domestic population moved geographically toreflect the economic integration between Japan and Korea after the annexation. This case suggests thatthe influence of colonies on the metropole surely existed, and we should consider this influence in the2historical study of imperialism. The increase in the influx of colonial commodities might have altered
the commodity market in the metropole, and this change might have triggered the further revisions ofcolonial trade and the production in the colonies. That is, we need to analyze the historical changes in
the commodity market structure in the metropole to capture the mutual relationships among each area
within the empire as a cyclic structure. This attempt leads us to understand the influence of theimperialism on the East Asian economy. Based on these discussions, we focus on rice as a primary
product in the Japanese market which was supplied by the colonies.
East and Southeast Asia have a strong food culture that relies on rice as a staple food, and thisregion has been the largest rice exporter in the world (Fabiosa 2011; Latham 2022). Japan suffered froma food shortage because of the early phase of industrialization and began to import rice in the 1890s.
However, imported rice, both from foreign countries and the Japanese colonies, tended to be consumed
only in the poorer areas of the large cities and coal mines until the 1910s (Mochida 1970, pp. 135–37).
The Japanese Empire was shaped narrow and long in a north-south direction and spread across three
climate zones: subarctic, temperate, and tropical. Hence, the botanical variety differed by region, andimported rice had a different texture and taste from the domestic product (Maeda 2022, pp. 423–25;
Verschuer 2016, pp. 2–4). This situation changed drastically after WWI.
Industrialization changed the pattern of food consumption through a rise in income levels, andthe per-capita rice consumption grew in Japan after WWI (Fukao and Settsu 2021; Kaneda 1970). In
response to this problem, the Japanese government promoted an increase in colonial rice imports, andthe colonial authorities forced farmers to raise their rice production for export (Omameuda 1993, pp.
181–261; Yi 2015, pp. 124–43; Seth 2020, pp. 310–12). Korea and Taiwan exported about 40 percentof their rice crops to Japan and became suppliers of primary products (Basu and Miroshnik 2020, p.
168). While the aforementioned literature reveals this growth of trade and production of colonial rice,
it does not explore how the expansion of colonial rice imports altered the metropole’s rice market.
Accordingly, we focus on the pricing of domestic and colonial rice in Tokyo to capture the structure of
the rice market and the changes it underwent after WWI.
Although the literature analyzing the pricing in the rice futures market paying attention to
Fama’s (1970) market efficiency exists, it does not explore the pricing of colonial rice (Ito, Maeda, andNoda 2017; 2018; Shizume 2011; Taketoshi 1999). The trading rule of rice exchanges stipulated thatcolonial rice was more of a deliverable good than anything, and the dealers could trade only domestic
rice in the futures markets. Therefore, the previous studies do not need to mention colonial rice pricing
when they analyze the market efficiency of rice futures trade. By contrast, we broaden our scopes toinclude not only domestic rice, but also colonial rice in the spot and futures markets by employing
econometric techniques to examine the change in the rice pricing during the interwar period. This casestudy contributes to both Japanese economic history and the history of imperialism.
Not only Japan but also Western European countries depended on primary products forimports (Radetzki 1990, pp. 16–19). These imports determined market and industry structures, and thestructural alteration of the economy caused social change. For instance, Western Europe had
experienced an expansion of food imports, which altered its food culture since the advent of imperialism
in the late nineteenth century (Stearns 2017, pp. 112–13). Considering this flow of socio-economic3

history, our investigation reveals the origin of the social changes by focusing on the central commodity
market in the imperial country.
The rest of this study is organized as follows. Sections 2 through 4 provide the preliminary
examinations. Sections 2 and 3 explain the Japanese government’s rice policy and the colonial
authorities’ measures to expand the colonial rice consumption in Japan. Section 4 traces the rice prices
to explore the traders’ evaluation of colonial rice. Section 5 shows the econometric methodology anddata on rice prices, and Section 6 employs the time-series analysis to investigate the changes in the
structure of the rice market from 1917 to 1939. Finally, Section 7 presents the conclusion.

2

Tightening Restrictions on Rice Trading

2.1

Rice as a Central Part of Commodity Trading

Rice was a central part of commodity trade in Japan until the end of the 1930s. It was listed in morethan 80 percent of exchanges and held about 60 percent of the trading amount in futures during theinterwar period. In particular, the Tokyo Rice and Merchandise Exchange (TRME) and the OsakaDojima Rice Exchange accounted for approximately half of the total volume (see Appendix Figure 1).
The trading methods of rice in exchanges were as follows.
Every rice exchange traded a single standard brand of domestic rice with respect to threedifferent contract months: a nearby contract (one month), a second-nearest contract (two months), anda deferred contract (three months). The sellers chose settlement on balance or delivery of physical ricewhen they cleared their transactions of the nearby contract in these exchanges, and the average ratio ofdelivery volume to trading volume in the TRME was six percent from 1912 to 1931 (Ministry ofAgriculture and Forestry, Rice Bureau 1935b). These exchanges allowed the sellers to utilize not only
domestic rice but also Korean rice from 1913 (Ito, Maeda, and Noda 2017).
The brokers used this sophisticated system to forecast the future of the rice market, and riceexchanges generated the futures price of domestic rice as an index of the spot market. However, theJapanese government began to suppress rice exchanges to control rice prices at the beginning of the
1920s.

2.2

Rice Policies After the Rice Riots

In July 1918, kome-sōdō (the rice riots), a momentous event in the modern history of Japan, occurredbecause the rice prices skyrocketed. The wholesale rice prices increased by 1.9 times from the beginningof 1917 to July 1918 (Bank of Japan 1987, p. 28). This surge arose due to multiple factors. In 1918, theJapanese government sent its troops to Siberia and bought a tremendous volume of rice for the military.
It caused a rice shortage and triggered speculation, causing traders to hoard their rice in the expectationof higher prices. This situation tormented the masses and generated nationwide riots (Francks 2015, pp.
158–161; Kawahigashi 1990, pp. 68–72). Accordingly, the government was forced to dramaticallychange the rice policy in 1921.
In 1921, the government established Beikoku Hō (the Rice Law). This law allowed thegovernment to buy and sell physical rice in the spot market to adjust supply and demand (Ota 1938, p.
4332). However, it lacked effectiveness due to delays in the government’s actions. The Rice Law
permitted the government to intervene in the spot market only after estimating the supply-demandbalance of rice (Omameuda 1993, pp. 198–201). In response to this defect of the law, the government
amended the Rice Law in 1925 to control not only the supply-demand balance but also the rice price.
The government traded physical rice to stabilize the rice price fluctuations according to this amended
law, and this measure stifled rice futures trading. In fact, from 1921 to 1931, the annual volume of
futures rice trading in the TRME and all of Japan’s exchanges decreased by 33 and 35 percent,respectively (see Appendix Figure 1). 1 Nevertheless, the government additionally tightened the rice
price control after the Great Depression.

2.3

Oppressive Policies on Rice Trading After the Depressions

Japan panicked in the Great Depression from 1929 to 1930 and the Showa Depression in 1931. The
Showa Depression was an agricultural crisis caused by a bumper crop of rice in Japan and Korea in
1930. Many Japanese farmers lived in dire poverty because of the plummeting rice prices, and some ofthem were forced into trafficking their daughters. Accordingly, the government repealed the Rice Law
and enacted Beikoku Tōsei Hō (the Rice Control Law) in November 1933 to tighten rice price control.
Under the new regime, the government created a price range by setting maximum and minimum rice
prices each year and traded in physical rice to keep the price fluctuation within the set range (Ota 1938,
p. 731). These measures triggered further declines in the rice futures market. From 1932 to 1937, theannual volume of futures rice trading in the TRME and all exchanges decreased by 50 and 62 percent,respectively (see Appendix Figure 1).
The Japanese government enhanced its policies to control rice prices from the beginning of
the 1920s, and these measures weakened the rice futures market. In the same period, rice traders in thecentral cities expanded rice imports from Korea and Taiwan to mitigate the domestic rice supply
shortage.

3.

Expanding Colonial Rice Consumption in Central Markets

3.1

Colonial Rice Imports Under Industrialization and Urbanization

Industrialization and urbanization progressed in Japan after WWI. Japan expanded its exports of textile
products to the US and European colonies in Southeast Asia during WWI. Consequently, it enjoyed an
unprecedented economic boom (Flath 2014, pp. 45–48). During this boom, numerous modernizedfactories were established in the cities, and labor scarcity rose. Accordingly, the Japanese companies
raised their wage level, and many young agricultural workers relocated from rural areas to the cities.
This structural change caused a food shortage (Francks 2015, pp. 179–187).
The average growth rate of rice harvests was only 4.6 percent, whereas the population grewby 23.9 percent from 1920–24 to 1930–34. Japan faced a deficiency in domestic rice supply and

The volume of futures rice trading in 1922, August–November 1923, October 1925, and June 1929
were unknown because the data sources are missing.
15

required expansion of colonial rice imports. The average volume of Korean and Taiwanese rice imports
during this period grew by 1.5 and 3.4 times, respectively. As a result, the dependence on colonial riceincreased rapidly from 6.5 to 16.5 percent (Ministry of Agriculture and Commerce, Food Control
Bureau 1944, pp. 50–51). This situation escalated in the central cities rather than rural areas.
From 1920–24 to 1930–34, the average population of Tokyo increased by 72 percent, while
this ratio for all of Japan was 23 percent (Management and Coordination Agency, Statistics Bureau
1987, pp. 96–100). The central cities relied on the colonial rice supply. However, the colonial rice wasdifferent in breed from the domestic one.
Domestic rice was a japonica breed, whereas Korean and Taiwanese rice were subspecificjaponica and an indica breed, respectively. Hence, the colonial rice differed in texture and taste fromthe domestic rice. In the next subsection, we will observe the import volume in the Tokyo Fukagawa
Shōmai Shijō (Tokyo-Fukagawa Rice Spot Market) to capture how the quality difference affected theconsumption of colonial rice.

3.2

Stepwise Growth of Colonial Rice Consumption

The rice traders accumulated in the Fukagawa area at the back of the port of Tokyo to purchase various
rice supplies shipped by sea from all over Japan and the Japanese colonies in the Tokyo-Fukagawa Rice
Spot Market (FRSM), the largest rice spot market in Tokyo. However, rice was also traded outside the
FRSM also existed, and its volume in circulation increased with the upgrading of transportation
infrastructure. The rice cultivated around Tokyo was transported on the Kanda River to the Kanda River
Rice Spot Market in Akihabara.
In 1890, the Akihabara Freight Station was established near the Kanda River Rice Spot Market.
This station blossomed as one of the key rail freight hubs in Tokyo, and rice cultivated in eastern Japanwas carried by rail to the Kanda River Rice Spot Market via the Akihabara Freight Station (Omameuda
2000, pp. 201–09). Furthermore, the Ministry of Railways improved the freight facilities, and manystations in Tokyo boosted their freight services from the 1920s. For example, the volume of rice arriving
at Ikebukuro Station, the terminal in the northwest of Tokyo, increased by 2.4 times in only five years
from 1922 (Ministry of Railways, Transportation Bureau 1928, pp. 17).
For these reasons, the volume of rice imports in the FRSM did not increase during the interwar
period.2 Nevertheless, the FRSM was still the largest rice market in Tokyo until the end of the 1930s.
Accordingly, we analyze the monthly volume of rice imports in the FRSM from 1917 to 1939, as shownin Figure 1. 3
Colonial rice consumption in Tokyo expanded in a stepwise manner, and the process had twoturning points. First, Korean rice consumption escalated exponentially in the middle of the 1920s.
Second, Korean rice consumption increased further and Taiwanese rice consumption also surged in theearly 1930s. At the same time, consumers tended not to buy colonial rice until the aftermath of WWI,

There is no date on the trading in the Kanda River Rice Spot Market.
Figure 1 uses a unit “koku” to demonstrate the import volume. The “koku” is a standard unit ofmeasurement in Japanese agriculture and one koku is equal to 180.39 liters.

2
36

Figure 1
The Volume of Imports in the Tokyo-Fukagawa Rice Spot Market, January 1917–June 1939
Sources: Tokyo City Government (1921, pp. 658–659); Tokyo Chamber of Commerce (1918, pp. 4–7; 1919,
pp. 4–7; 1921, pp. 4–7; 1922, pp. 4–7; 1924, pp. 4–7; 1926, pp. 6–9; 1927, pp. 47–50); Tokyo
Chamber of Commerce and Industry (1928, pp. 106–09; 1929, pp. 106–09; 1931, pp. 130–33; 1933;
pp. 132–35; 1935, pp. 142–45; 1936, pp. 154–57; 1937, pp. 162–65; 1939, pp. 182–85); The dataof May 1922 and from June 1923 to January 1924 is missing because the sources were destroyed byfire in the Great Kanto Earthquake of 1 September 1923.

and the 12-months moving average ratios of Korean and Taiwanese rice to the total volume werefloundering below 20 percent. During this period, consumers had a relative preference for Taiwaneserice over Korean rice. This consumption pattern resulted from qualitative proximity to the rice harvested
in eastern Japan.
Domestic rice could be divided into two major categories, soft and hard, and the farmers inTokyo-centered eastern Japan cultivated soft rice. Taiwanese rice had a soft texture and a similar quality
to rice produced in eastern Japan (Tokyo Rice and Merchandise Exchange, Inspection Division 1934,
p. 154). However, Korean rice was not only of a different breed from domestic rice but also had a quality
7defect.
The rice threshing method in Korea was different from Japan. Korean farmers slammed paddy
rice on a large stone on the ground and gleaned the threshed grains. Hence, Korean rice got
contaminated with sand and small stone, and the millers of Korean rice had to possess a specific millingmachine for removing the contaminants (Hishimoto 1938, p. 224). Nevertheless, there were a few
specialized millers in Tokyo. This caused Korean rice consumption to struggle in Tokyo (Yi 2015, p.
149). These circumstances dramatically changed after the Great Kanto Earthquake of 1 September, 1923.

3.3

Diffusion of Korean Rice After the Earthquake

The Great Kanto Earthquake occurred two minutes before noon when many people set their table forlunch, and a tremendous fire broke out in the kitchens of homes, companies, factories, and schools. The
ensuing catastrophe killed about 100 thousand people and turned Tokyo into completely burned-out
ruins (Central Meteorological Observatory 1924, p. 4). The survivors suffered from food shortages, andthe government transferred 35.1 thousand kokus (63 million liters) of stockpiled rice from western cities
such as Osaka to Tokyo. This emergency relief included 11.3 thousand kokus (20 million liters) ofimported rice, and this urgent assistance provided substantive opportunities for the masses in Tokyo totaste Korean rice (Ota 1938, pp. 608–09).
Korean rice consumption in Osaka was greater than in Tokyo before the earthquake for two
reasons. First, the Chosen Yusen (Korean Mailing Ship Line) received subsidies from the GovernorGeneral of Korea (GGK) in 1917 and opened a shipping route between Osaka and Korea whichtransported Korean rice (Chosen Yusen Line 1937, p. 102). Inevitably, the main destination for Koreanrice was the port of Osaka (Korean Rice Association 1934, p. 19). Second, the rice traders in Osaka
could trade Korean rice because many of them had specialized machines to purify the contaminants of
Korean rice. Consequently, in the early 1920s, Korean rice accounted for 54 percent of consumption
volume in Osaka (Korea Shokusan Bank 1928, p. 107). Korean rice was unevenly distributed in Japan,
and the relief rice from western Japan included Korean rice. In this situation, the GGK regarded theearthquake as an opportunity to expand Korean rice consumption in Tokyo and established the Korean
Rice Association in November 1923.
The Korean Rice Association held tasting events and sent samples to distillers of sake (ricewine) to promote Korean rice consumption in and around Tokyo (Korean Rice Association 1934, pp.
20–30, 66–69). In tandem with these efforts, the GGK attempted to improve Korean rice quality in threeways.
First, since the 1910s, the GGK had improved the Korean rice breed to suit Japanese
consumers’ tastes. The average yield ratio for the improved breed to the total rice harvest in Korea
rapidly increased from only 12 percent in 1912–14 to 73 percent in 1922–24 (Tohata and Okawa 1939,
pp. 438–39). Second, the GGK forced Korean farmers to spread a mushiro (straw mat) in the threshingarea. Third, it also introduced senba-koki, a threshing tool that had been used in Japan since the earlyeighteenth century. The latter two measures prevented Korean rice from mixing with sand (Korean Rice
Association 1934, p. 156).
The GGK enforced these policies to shrink the quality difference with respect to domestic rice,8and the ratio of Korean rice to the total import volume in Tokyo continued at about 40 percent after theearthquake. This ratio further increased to above 50 percent, along with increased Taiwanese riceimports in the early 1930s (see Figure 1).

3.4

Expansion of the Korean and Taiwanese Rice Consumption

The Governor-General of Taiwan (GGT) also attempted to improve the quality of Taiwanese rice, likethe GGK. In the 1920s, the Japanese government employed the slogan “Industrial Japan with
agricultural Taiwan” (Li 2019, p. 104). In line with this slogan, in 1922, the Taichung Agricultural
Experimental Station of the GGT succeeded in creating a new variety of rice, Hōrai-mai, which wasclassified as a japonica breed. This was a game-changing event because the farmers in the tropical zone,
including Taiwan, could not cultivate a japonica breed before the appearance of Hōrai-mai (GovernorGeneral of Taiwan 1945, p. 244). As a result, the ratio of Hōrai-mai to the total yield volume of
Taiwanese rice reached 40 percent in 1932–34 (Ministry of Agriculture and Commerce, Food Control
Bureau 1944, pp. 224–26). Taiwan could supply rice that suited the domestic consumers’ taste.
In parallel, the GGT enforced the Regulation of Taiwanese Rice Inspection in July 1926 andrevised this regulation in July 1931. This regulation stipulated that the GGT had to check the quality,
dryness, preparation, weight, and the packaging of rice to promote rice quality (Yagashiro 2012, pp.
234–41). The GGK also introduced regulations that had the same contents as the GGT’s measures.
In November 1932, the GGK started the National Rice Inspection System to checkcontamination by foreign materials, dryness, volume, weight, and the packaging of the rice (Hishimoto
1938, pp. 308–25). These systems in Korea and Taiwan stabilized the quality of colonial rice.
Consequently, colonial rice consumption grew, and the volume of colonial rice imports in Tokyo
increased from 1932 (see Figure 1). At the same time, the domestic consumers improved theirevaluation of colonial rice.

4Colonial Rice Catching Up with Domestic Rice in Price

4.1

Shrinking Differences in Price Between Domestic and Colonial Rice

Figure 2 denotes the monthly prices of domestic, Korean, and Taiwanese rice in Tokyo from 1917 to1939.
From the late 1910s to 1920, rice prices increased due to rice shortage, and the relative pricesof colonial to domestic rice remained above 70 percent. However, at the beginning of the 1920s, thecritical rice shortage was eased, and these relative prices decreased. In particular, the relative price of
Taiwanese to domestic rice dropped to below 50 percent in 1922. However, the relative price of Koreanrice persisted above 80 percent since Korea had raised the production of the improved breed. In thesame year, the GGT also created an enhanced breed of rice in Taiwan, and the relative prices of
Taiwanese rice began to increase. Furthermore, the GGT enforced the Regulation of Taiwanese RiceInspection in 1926, and the appreciation rate of relative prices of Taiwanese rice soared in the next year.
Until the beginning of the 1930s, the cultivation of improved rice in the colonies grew, and
the GGK and the GGT introduced and strengthened quality regulations. Through these extraordinary9Figure 2
The Rice Prices in Tokyo, January 1917–September 1939
Sources: Ministry of Agriculture and Forestry, Agricultural Bureau (1925, pp. 24–28; 1928, pp. 44–54);
Ministry of Agriculture and Forestry, Rice Bureau (1937, pp. 126–97); Ministry of Railways,
Transportation Bureau (1925, pp. 516–20); Governor-General of Taiwan, Industrial Bureau (1937,
pp. 100–03; 1941, pp. 112–15). Toyo Keizai Shimpo Sha (1923, p. 176; 1924, p. 175). The prices in
September and October 1923 are missing because the sources were destroyed by fire in the Great
Kanto Earthquake of 1 September 1923, and any other blank in the figure is due to missing values
in the sources.

efforts, the ratio of colonial rice to the total volume of rice imports in Tokyo rose (see Figure 1). Colonial
rice became an essential foodstuff in Tokyo, and the relative prices of colonial to domestic rice also
increased. However, the price difference between types of colonial rice existed even in the 1930s. While
Korean rice had surpassed the domestic rice in price since the introduction of the National RiceInspection System in 1932, Taiwanese rice remained lower in price than domestic rice. Consumers inTokyo regarded Taiwanese rice as inferior to Korean rice. This recognition was reflected in the delivery
system of the TRME.
10

4.2

Substitutability Between Domestic and Colonial RiceThe rice exchange brokers appreciated the dried Korean rice. The sellers often stored the delivered rice
in warehouses for a long time, and the dried rice was suitable for delivery. The National Rice Inspection
System guaranteed the dryness of Korean rice, and the brokers expanded their usage of Korean rice inexchanges (Yi 2015, pp. 181–82). The average ratio of Korean rice to the total delivery volume in the
TRME often reached more than 80 percent after 1934 (Ministry of Commerce and Industry, Commercial
Bureau 1929–39). At the same time, the price difference between domestic and Korean rice almost
disappeared (see Figure 2). For these reasons, the rice traders in Tokyo regarded Korean rice as a
substitute of domestic rice during the middle of the 1930s. The Japanese government also shared thisrecognition of the nature of Korean rice in the operation of the Rice Control Law.
The fourth article of the Rice Control Law allowed not only the Ministry of Agriculture andForestry but also the colonial governments to buy and sell physical rice in the metropole and colonies(Ota 1938, p. 731). Hasumi (1957) records the official purchase and sales volume of rice from 1933 to1937. According to these records, the central government bought rice extensively in 1934 when the rice
prices remained in a slump, and the ratio of the government’s purchase to the harvest volume in Japanwas 23 percent. In the same year, the GGK also bought rice frequently in Korea, and the ratio of the
GGK’s purchase to the volume of Korean rice imports in Japan was 19 percent (Ministry of Agriculture
and Commerce, Food Control Bureau 1944, pp. 1, 50). Korean rice gained importance as a substitutefor domestic rice, and Japan imported it massively (see Figure 1). Accordingly, the authorities
considered buying not only domestic rice but also Korean rice as a necessary measure to raise the rice
prices.
These authorities diminished their interventions in the spot market after 1935 because the rice
prices rose steadily (see Figure 2). The ratios of their purchasing to the supply volume of domestic andKorean rice were less than ten and three percent, respectively (Hasumi 1957, pp. 339–479; Ministry ofAgriculture and Commerce, Food Control Bureau 1944, pp. 1, 50). The authorities purchased thephysical rice actively only in 1934. By contrast, Taiwanese rice could not become an alternative todomestic rice, and the authorities did not buy it even in 1934.
In the tropical zone, cultivated rice is frequently caught in squalls. Taipei had 38 percent moreannual precipitation than Seoul in 1931 (Governor-General of Taiwan 1932, pp. 22–23). Accordingly,
Taiwanese rice which had moisture content was perishable (Tokyo Rice and Merchandise Exchange,
Inspection Division 1934, pp. 72–73). It was unsuitable for delivery, and rice exchanges did not list it
as a deliverable good. The authorities also shared this recognition of the quality difference between
domestic and Taiwanese rice. Consequently, they did not purchase the Taiwanese rice even in 1934.
The consumers in Tokyo considered colonial rice to be a different good to domestic rice in theimmediate aftermath of WWI. However, the quality difference between the two goods gradually shrankduring the interwar period. This change promoted expanding the consumption of Korean and Taiwaneserice, and the growth of colonial rice imports in Tokyo progressed in a stepwise manner. Accordingly,
we analyze how these stepwise changes in colonial rice consumption affected the pricing of the rice
market in Tokyo.
11

5.

Methodology for Analysis

5.1

The Method

We utilize four series of rice prices: the futures prices of domestic rice in the TRME and the wholesale
prices of domestic, Korean, and Taiwanese rice in the spot market from January 1917 to August 1939
in Tokyo. Price data for colonial rice before December 1916 does not exist, and the futures prices do
not exist after September 1939 because all rice exchanges were abolished in the previous month. Japanembarked on the Second Sino-Japanese War in July 1937 and faced serious border incidents with theUnion of Soviet Socialist Republics in May 1939. Under these deteriorating international relations, theJapanese government introduced new measures to control and mobilize various resources for thewartime economy and commanded all rice exchanges to shut down (Ohno 2018, p. 111).
For these reasons, our data includes 272 months from January 1917 to August 1939. However,there are missing data on all prices for two months in 1923. The Great Kanto Earthquake of September
1923 destroyed the TRME’s buildings and the government’s offices. The TRME was forced to suspend
its futures trading for two months (Tokyo Grain Exchange 2003, p. 61). The government could notcollect the spot prices during the same period. Accordingly, we exclude September and October of 1923
and divide the rest of the data for 270 months into three periods, as shown in Figure 2.
The first period is 80 months from January 1917 to August 1923. During the period before theearthquake, the consumers in Tokyo basically bought only domestic rice. The second period is 120
months from November 1923 to October 1933. During the period after the earthquake, Korean riceconsumption grew compared to Taiwanese rice consumption. The final period is 70 months from
November 1933 to August 1939. During this time, colonial rice consumption expanded, and theJapanese government enhanced its rice policy as symbolized by the enforcement of the Rice Control
Law in November 1933. We utilize the data in these three periods and estimate vector autoregressive(VAR) models to explore the changes in the rice pricing in each period.

5.2

The Model

We employ a four-dimensional VAR model for the multiple time-series data of the futures prices andthree spot prices. The VAR model is:𝑝𝑝

𝒚𝒚𝑡𝑡 = 𝑨𝑨0 + ∑𝑖𝑖=1 𝑨𝑨1𝑖𝑖 𝒚𝒚𝑡𝑡−𝑖𝑖 + 𝝐𝝐𝑡𝑡

(1)where 𝒚𝒚𝑡𝑡 = [𝑦𝑦1𝑡𝑡 , 𝑦𝑦2𝑡𝑡 , 𝑦𝑦3𝑡𝑡 , 𝑦𝑦4𝑡𝑡 ]′ ; 𝑦𝑦1𝑡𝑡 , 𝑦𝑦2𝑡𝑡 , 𝑦𝑦3𝑡𝑡 , and 𝑦𝑦4𝑡𝑡 are the futures prices and the spot prices ofdomestic, Korean, and Taiwanese rice, respectively; 𝑨𝑨0 is a four-dimensional constant vector; 𝑨𝑨1𝑖𝑖 isa four-by-four parameter vector; a four-dimensional white-noise vector 𝝐𝝐𝑡𝑡 = [𝜀𝜀1𝑡𝑡 , 𝜀𝜀2𝑡𝑡 , 𝜀𝜀3𝑡𝑡 , 𝜀𝜀4𝑡𝑡 ]′. A VAR

model does not rely on strong theoretical assumptions and is suitable for the empirical study of
economic history. We convert the VAR model into a vector moving average (VMA) form to employ

innovation accounting following Sims (1980). This methodology shows the time path of the various
shocks on the variable in the VAR system to examine the relationships among variables (Enders 2015,
pp. 294–302). The VMA form is as follows:12

𝒚𝒚𝑡𝑡 = 𝑪𝑪0 + ∑∞𝑖𝑖=0 𝑪𝑪𝑖𝑖 𝝐𝝐𝑡𝑡−1(2)where 𝑪𝑪0 = (𝑰𝑰 − 𝑨𝑨1 𝐿𝐿)−1 𝑨𝑨0 and 𝑪𝑪𝑖𝑖 = 𝑨𝑨1𝑖𝑖 . The procedure for innovation accounting is described

below.

First, we provide a standard deviation unit of impulse on the disturbance term at the zero

period in Equation 2. Second, we multiply parameters by impulses in each period to calculate an impulse
response function (IRF). An IRF denotes how an impulse has effects on each variable. Third, we
compute a relative variance composition (RVC) by capturing the relative contribution degree ofdispersion of an impulse on a variable to the other variable’s dispersion. 4 An RVC demonstrates how
much the fluctuation of a variable affects the other variable. Finally, we analyze the changes in IRFs
and RVCs in each period to grasp how the rice pricing altered with increases in colonial rice circulation.

5.3

Data

We obtain the weighted average monthly data on the futures prices of the differed contract in the TRME
from two statistical surveys: Ministry of Agriculture and Forestry, Rice Bureau (1935b), and Tokyo
Stock Exchange (1935–39). The deferred contract transaction was larger in trading volume than theother two transactions (Ito, Maeda, and Noda 2018). The average ratio of the deferred contract to thetotal volume in the TRME from January 1917 to June 1935 was 74 percent (Ministry of Agriculture andForestry, Rice Bureau 1935b). 5 Accordingly, we choose the deferred contract prices as the futures
prices.
For the three spot prices, we acquire the weighted average monthly data from five statisticalreports: Governor-General of Taiwan, Industrial Bureau (1937; 41), Ministry of Agriculture andForestry, Agricultural Bureau (1925; 28), Ministry of Agriculture and Forestry, Rice Bureau (1937a),
Ministry of Railways, Transportation Bureau (1935), and Toyo Keizai Shimpo Sha (1924; 25). Previous
studies also employ parts of these reports; however, they tend not to pay attention to the rice prices in
the 1930s.
While Ito, Maeda, and Noda (2018), Omameuda (1993, pp. 112, 144, 257), and Yagashiro(2012, p. 238) deploy the domestic rice prices from 1881 to 1932, the Korean rice prices from 1908 to
1930, and the Taiwanese rice prices from 1920 to 1937, respectively, we extend the term of theinvestigation until 1939. The price data after 1937 is shown by only the Governor-General of Taiwan,
Industrial Bureau (1941) which is held by only five Japanese institutes: Hokkaido University, Shiga
University, Osaka Metropolitan University, Okayama University, and Oita University. We gained thecooperation of Oita University to obtain the data.
We utilize these four series of data to estimate VAR models in every three periods: January
1917–August 1923, November 1923–October 1933, and November 1933–August 1939. The estimation
See textbooks of the time series econometrics such as Enders (2015) for further information on thedetailed calculation procedure of an IRF and an RVC.
5Ministry of Agriculture and Forestry, Rice Bureau (1935b) demonstrates the trading volume until June
1935, and the data after the following month is missing.
4

13

Table 1
Descriptive Statistics and Results of Unit Root Tests
January 1917–August 1923

November 1923–October 1933

November 1933–August 1939

Futures

Domestic

KoreanTaiwanese

Futures

Domestic

KoreanTaiwanese

Futures

Domestic

KoreanTaiwanese

Mean

0.009

0.010

0.011

0.004

-0.003-0.004-0.004-0.001

0.007

0.009

0.009

0.010

Std. dev.

0.082

0.071

0.083

0.083

0.061

0.055

0.062

0.066

0.026

0.022

0.032

0.030

Min.

-0.241-0.208-0.206-0.192-0.319-0.406-0.438-0.385-0.083-0.077-0.093-0.083

Max.

0.021

0.236

0.246

0.246

0.197

0.174

0.183

0.205

0.085

0.063

0.152

0.100

ADF

-6.899***-4.330***-8.552***-5.727***-9.753***-8.220***-8.675***-8.924***-6.012***-5.600***-7.883***-6.616***

Lags

0

1

0

0

0

1

0

0

0

0

0

0

N

79

79

79

79

119

119

119

119

70

70

70

70

Notes: “ADF,” “Lags,” and “N” denote the ADF test statistics, the lag order selected by the Schwartz Bayesian information criteria, and the number ofobservations, respectively. “***” means significant at one percent. These statistics are computed using EViews 12.

14

procedure is as follows.
First we take the first difference of the natural log of each series. Second, we apply theAugmented Dickey-Fuller (ADF) test as the unit root test to confirm whether the variables satisfy thestationarity condition. Table 1 shows the descriptive statistics and unit root test results.
We confirm two characteristic points of the standard deviations. First, the spot prices of
Korean and Taiwanese rice were more volatile than the spot prices of domestic rice in all periods. This
fact suggests there was a difference in the pricing between domestic and colonial rice. The government
began to intervene in the rice market according to the Rice Law in 1921 and traded only domestic andforeign rice (Hasumi 1957, pp. 152–89, 203–23, 234; Ministry of Agriculture and Commerce, Food
Bureau 1922–23; 1925; Ministry of Agriculture and Forestry, Agricultural Bureau 1926–30; Ota 1938,
pp. 594–710). It did not buy and sell colonial rice, and the price fluctuation of domestic rice remained
stable. Second, the standard deviations of all variables decreased after November 1933. The government
enforced the Rice Control Law to stabilize the rice prices in the same month, and this measuresuppressed the rice price fluctuations.
Table 1 also demonstrates the results of the unit root test. We use the Schwartz Bayesian
information criteria (SBIC) to select the optimal lag length for the ADF test, and the results indicatethat all variables satisfy the stationarity condition.
In addition, we employ Johansen’s (1991) trace test and Johansen’s (1988) maximal
eigenvalue test to confirm cointegration relations among variables. If the results of these tests indicate
the existence of cointegration relations, we should select a vector error correction model instead of a
VAR model. However, all maximal eigenvalue tests of every period do not reject any null hypotheses
whereas all trace tests of every period reject at least the null hypothesis of no cointegration (seeAppendix Table 1). Accordingly, these results do not clearly indicate the presence of cointegration
relations, and we estimate VAR models in the next section.

6

Changing the Pricing of the Rice Market

6.1

Market Mainly for Domestic Rice Before the Great Kanto Earthquake

We select the optimal lag length according to the SBIC and estimate VAR models for three periods.
Table 2 summarizes our estimation results for all periods.
We convert the estimated VAR model into the VMA form to calculate IRFs and RVCs. Figure
3 shows IRFs for the first period from January 1917 to August 1923.
We observe the 95 percent confidence bands of IRFs deviating from zero and find that thepricing of futures and spot prices of domestic rice affected colonial rice pricing. For details, IRFs denotefour points of interrelations among four variables.
First, the pricing in the futures market had an impact on all variables. Second, the pricing ofdomestic rice in the spot market acted on all other spot prices. Third, the pricing of Korean rice
influenced only itself. Fourth, the pricing of Taiwanese rice basically affected itself and had a marginal
impact on the pricing of domestic rice in the spot market.
The consumers in Tokyo preferred Taiwanese rather than Korean rice before the earthquake
15

Table 2
VAR Estimations of Three Periods from January 1917 to August 1939
January 1917–August 1923

Constant
𝑦𝑦1𝑡𝑡−1

𝑦𝑦2𝑡𝑡−1

𝑦𝑦3𝑡𝑡−1
𝑦𝑦4𝑡𝑡−1
𝑅𝑅�2

November 1923–October 1933

November 1933–August 1939

𝑦𝑦1𝑡𝑡

0.0101𝑦𝑦2𝑡𝑡

0.0087𝑦𝑦3𝑡𝑡

0.0102𝑦𝑦4𝑡𝑡

0.0033𝑦𝑦1𝑡𝑡-0.0044

𝑦𝑦2𝑡𝑡-0.0036

𝑦𝑦3𝑡𝑡-0.0031

𝑦𝑦4𝑡𝑡-0.0016

𝑦𝑦1𝑡𝑡

0.0049𝑦𝑦2𝑡𝑡

0.0053𝑦𝑦3𝑡𝑡

0.00390.0064[0.0092][0.0077][0.0088][0.0086][0.0056][0.0048][0.0054][0.0057][0.0032][0.0028][0.0036][0.0037]0.2478-0.1134-0.0169

0.34200.17010.31930.33180.53600.27420.05970.3216

0.2617[0.1818][0.1527][0.1741][0.1705][0.1464][0.1249][0.1400][0.1480][0.1760][0.1501][0.1937][0.2019]-0.1569

0.16770.5139-0.1885-0.5873-0.07310.1101-0.2658

0.03360.57091.02340.5713[0.2635][0.2213][0.2523][0.2471][0.3028][0.2583][0.2896][0.3061][0.2258][0.1925][0.2485][0.2589]-0.1712-0.0655-0.4809-0.1447

0.2733-0.0119-0.1889-0.2533-0.3181-0.1778-0.8869-0.4489[0.1870][0.1571][0.1791][0.1754][0.2476][0.2112][0.2368][0.2503][0.1691][0.1441][0.1861][0.1939]0.25620.35790.32070.35700.16230.11010.15590.1667

0.1979-0.0904-0.0143-0.0256[0.1787][0.1501][0.1712][0.1676][0.1370][0.1169][0.1310][0.1385][0.1807][0.1541][0.1989][0.2072]

0.06470.11970.15800.19300.01540.12330.13070.12530.10620.10320.27850.0786𝑦𝑦4𝑡𝑡

Notes: 𝑅𝑅� 2 denotes adjusted R-squared. The standard errors are in brackets. The optimal lag length is selected by the Schwartz Bayesian information criteria.
These estimates are computed using EViews 12.

16

Futures ---> Futures

Spot_Domestic ---> Futures

Spot_Taiwanese ---> Futures

Spot_Korean ---> Futures

.08

.08

.08

.08

.06

.06

.06

.06

.04

.04

.04

.04

.02

.02

.02

.02

.00

.00

.00

.00

-.02

-.02

-.02

-.02

1

2

3

4

5

6

7

8

9

1

10

2

Futures ---> Spot_Domestic

3

4

5

6

7

8

9

10

1

2

Spot_Domestic ---> Spot_Domestic

3

4

5

6

7

8

9

1

10

.06

.06

.06

.04

.04

.04

.04

.02

.02

.02

.02

.00

.00

.00

.00

2

3

4

5

6

7

8

9

1

10

2

3

4

5

6

7

8

9

10

1

2

Spot_Domestic ---> Spot_Korean

Futures ---> Spot_Korean

3

4

5

6

7

8

9

1

10

.04

.04

.02

.02

.02

.02

.00

.00

.00

.00

-.02

-.02

-.02

-.02

2

3

4

5

6

7

8

9

10

-.04

1

2

Futures ---> Spot_Taiwanese

3

4

5

6

7

8

9

-.04

10

1

2

Spot_Domestic ---> Spot_Taiwanese

3

4

5

6

7

8

9

10

-.04

.06

.06

.04

.04

.04

.04

.02

.02

.02

.02

.00

.00

.00

.00

-.02
2

3

4

5

6

7

8

9

10

-.02
1

2

3

4

5

6

7

8

9

10

6

7

8

9

10

3

4

5

6

7

8

9

10

2

3

4

5

6

7

8

9

10

-.02
1

2

3

4

5

6

7

8

9

Figure 3
Impulse Response Functions from January 1917 to August 1923
Note: The dashed lines represent the 95 percent confidence band. These estimates are computed using EViews 12.
175Spot_Taiwanese -- -> Spot_Taiwanes e

.06

1

1

Spot_Korean ---> Spot_Taiwanes e

.06

-.02

4

Spot_Taiwanese ---> Spot_Korea n

.04

1

2

Spot_Korean ---> Spot_Korea n

.04

-.04

3

Spot_Taiwanese ---> Spot_Domestic

Spot_Korean ---> Spot_Domestic

.06

1

2

10

1

2

3

4

5

6

7

8

9

10

of 1923, as we mentioned above. The import volume of Taiwanese rice tended to be larger than Koreanrice during the period (see Figure 1). It had a role in complementing the rice supply in Japan and had amarginal power to alter the pricing of domestic rice in the spot market. Nevertheless, Taiwanese rice
was not a substitution good for the domestic one.
Taiwanese rice was radically different in quality from any other rice. It belonged to an indica
breed, while domestic and Korean rice were a japonica and a subspecific japonica breed, respectively.
Based on this, the consumers did not regard Taiwanese rice as an alternative to the domestic one andbought it as a mixed diet to supply a deficiency at the time just prior to the harvest season of domestic
and Korean rice (Mochida 1970, p. 144; Yamazaki 1914, pp. 187–88).
The rice export volume from Taiwan to Japan entered its peak from June to September while
the circulation volume of domestic and Korean rice in Japan increased from the fall season and reachedfull bloom in November and December every year (Ministry of Agriculture and Forestry, Rice Bureau
1936, pp. 18–20; 1937b, pp. 70–78; Ministry of Agriculture and Commerce, Food Control Bureau 1944,
p. 34). Taiwanese rice began to be distributed in large quantities in Japan before the rice harvest season
and differed in price from other rice during spring and summer. From April to August in 1917–23, theaverage rate of change in prices of domestic, Korean, and Taiwanese rice were 11.9 percent, 11.0 percent,and -5.7 percent, respectively. 6 Taiwanese rice prices were inversely proportional to domestic rice
prices. This fact suggests that Taiwanese rice was little more than a complementary good for thedomestic rice. The pricing of domestic rice had a negative impact on Taiwanese rice pricing, albeit thatthe confidence band of the IRF from domestic rice in the spot market to Taiwanese rice does not deviate
from zero (see Figure 3). In stark contrast, the pricing of domestic rice had a positive impact on Koreanrice pricing. It means that Korean rice was a substitutional good to the domestic one. For further analysis,
we scrutinize the RVCs of the same period, as shown in Figure 4.
The pricing in the futures market impacted the pricing of both domestic and colonial rice inthe spot market. Domestic rice pricing in the spot market was affected by three pricing influences: itself,
the pricing of the futures, and Taiwanese rice pricing. However, Taiwanese rice pricing had only alimited effect. Therefore, colonial rice pricing did not fundamentally affect the pricing of domestic ricein the futures and spot markets. Antithetically, domestic rice pricing spilled over to colonial rice pricing.
Korean rice pricing resulted from itself and the pricing of domestic rice in the futures and spot
markets. The RVC of Korean rice prices is composed of about 40 percent of itself, about 30 percent ofdomestic rice prices in futures, and about 30 percent of domestic rice prices in the spot market. The
pricing of domestic rice exercised a major impact on the price volatility of Korean rice. Taiwanese ricepricing also showed the same tendency as Korean rice pricing.
The RVC of Taiwanese rice prices is constituted of about 40 percent of itself, about 50 percent
of domestic rice prices in futures, and about ten percent of domestic rice prices in the spot market. About
60 percent of Taiwanese rice price volatility resulted from the pricing of domestic rice in the futuresand spot markets.

6

We calculate the average rates of change in rice prices by utilizing the data shown in Figure 2.
18

FuturesSpot_Domestic

100

100

80

80

60

60

40

40

20

20

0

1

2

3

4

5

6

7

8

9

0

10

1

2

3

4

Spot_Korean
100

80

80

60

60

40

40

20

20

1

2

3

4

5

6

6

7

8

9

10

7

8

9

10

Spot_Taiwanese

100

0

5

7
Futures

8

9

0

10

Spot_Domestic

1

Spot_Korean

2

3

4

5

6

Spot_Taiwanese

Figure 4
Relative Variance Compositions from January 1917 to August 1923
Note: These estimates are computed using EViews 12.

19

To sum up, according to our investigation as the first clinometric analysis on the pricing ofdomestic and colonial rice in Japan, the pricing of colonial rice depended on both itself and the pricevariation of domestic rice. By contrast, colonial rice pricing did not affect the pricing of domestic ricein the futures and spot markets. Furthermore, the pricing of Korean and Taiwanese rice did not affecteach other. Consequently, the pricing of domestic rice had a large impact on not only itself but alsocolonial rice pricing. According to these observations, the rice market in Japan was mainly for domestic
rice before the Great Kanto Earthquake of 1923.

6.2

The Market with an Increase in the Korean Rice Imports

Table 2 and Figure 5 show our estimation results of the VAR model and IRFs for the second period
from November 1923 to October 1933.
These have similar shapes to the IRFs for the first period. However, the confidence band of
the IRF from the spot prices of domestic rice to Taiwanese rice prices in Figure 5 deviates from zero,and the pricing of domestic rice in the spot market clearly had a negative impact on Taiwanese ricepricing. This fact means that Taiwanese rice obviously became a complementary good to the domesticone.
After the beginning of the 1920s, the price difference between Korean and Taiwanese riceincreased, and the relative prices of Korean rice compared with domestic rice increased because thedifference in quality among them shrank (see Figure 1). In the same decade, the measure for quality
improvement in Taiwan fell behind Korea, although the quality difference between Taiwanese anddomestic rice also began to shrink. The GGK had already improved rice breeding techniques from the
1910s. On the other hand, the GGT finally succeeded in improving the Taiwanese rice breed in 1922,
and the harvest of the new breed increased after a few years. As a result, Taiwanese rice received a poor
evaluation in the middle of the 1920s, and the influence of Taiwanese rice pricing on the pricing ofdomestic rice in the spot market disappeared in the second period. This change in the relative position
between Korean and Taiwanese rice influenced the pricing in the rice market. Figure 6 demonstrates
the RVCs for the second period.
The RVCs of domestic rice in the spot market and Korean rice altered from the first period,
and the pricing of domestic rice in the futures market and Taiwanese rice in the first and second periods
have almost similar tendencies. The pricing of domestic rice in the spot market was independent of the
Taiwanese rice pricing. The pricing of domestic rice in the futures market reinforced its power to affectKorean rice pricing. The brokers in rice exchanges utilized Korean rice as a deliverable good with anincrease in the harvest of improved Korean rice. Korean rice began to have a similar quality to domestic
rice, and the ratio of futures prices in the RVC of Korean rice prices increased from about 30 to 60
percent during two periods (see Figures 4 and 6).
In the second period, the rice pricing was rarely different from the first period, and the pricing
of colonial rice still did not affect the pricing of domestic rice in the futures and spot markets. Thissituation drastically changed in the final period.

20

Futures ---> Futures

Spot_Domestic ---> Futures

Spot_Korean ---> Futures

Spot_Taiwanese ---> Futures

.06

.06

.06

.06

.04

.04

.04

.04

.02

.02

.02

.02

.00

.00

.00

.00

1

2

3

4

5

6

7

8

9

1

10

Futures ---> Spot_Domestic

2

3

4

5

6

7

8

9

10

1

2

3

4

5

6

7

8

9

10

1

Spot_Korean ---> Spot_Domestic

Spot_Domestic ---> Spot_Domestic
.04

.04

.04

.03

.03

.03

.03

.02

.02

.02

.02

.01

.01

.01

.01

.00

.00

.00

.00

2

3

4

5

6

7

8

9

1

10

2

Futures ---> Spot_Korean

3

4

5

6

7

8

9

10

1

2

Spot_Domestic ---> Spot_Korean

3

4

5

6

7

8

9

10

1

.04

.04

.02

.02

.02

.02

.00

.00

.00

.00

3

4

5

6

7

8

9

1

10

Futures ---> Spot_Taiwanese

2

3

4

5

6

7

8

9

10

1

2

Spot_Domestic ---> Spot_Taiwanese

3

4

5

6

7

8

9

1

10

Spot_Korean ---> Spot_Taiwanese

.04

.04

.04

.02

.02

.02

.02

.00

.00

.00

.00

-.02
1

2

3

4

5

6

7

8

9

10

2

3

4

5

6

7

8

9

1

10

2

3

4

5

6

7

8

9

10

Figure 5
Impulse Response Functions from November 1923 to October 1933
Note: As in Figure 3.
21

6

7

8

9

10

3

4

5

6

7

8

9

10

2

3

4

5

6

7

8

9

10

-.02

-.02
1

5

Spot_Taiwanese ---> Spot_Taiwanese

.04

-.02

4

Spot_Taiwanese ---> Spot_Korean

.04

2

2

Spot_Korean ---> Spot_Korean

.04

1

3

Spot_Taiwanese ---> Spot_Domestic

.04

1

2

1

2

3

4

5

6

7

8

9

10

FuturesSpot_Domestic

100

100

80

80

60

60

40

40

20

20

0

1

2

3

4

5

6

7

8

9

0

10

1

2

3

4

Spot_Korean
100

80

80

60

60

40

40

20

20
1

2

3

4

5

6

6

7

8

9

10

7

8

9

10

Spot_Taiwanese

100

0

5

7
Futures

8

9

0

10

Spot_Domestic

1

Spot_Korean

2

3

4

5

6

Spot_Taiwanese

Figure 6
Relative Variance Compositions from November 1923 to October 1933
Note: As in Figure 4.

22

6.3

The Market After the Quality Improvement of Colonial Rice

Table 2 and Figure 7 illustrate our estimation results of the VAR model and IRFs for the third period
from November 1933 to August 1939.
The IRF from the spot prices of domestic rice to Taiwanese rice prices alters from negative topositive in the third period. This alteration means that Taiwanese rice changed from a complementary
good to a substitute good. In fact, the average rates of change in the prices of domestic, Korean, andTaiwanese rice from April to August in 1934–39 were 4.4 percent, 4.3 percent, 0.9 percent,respectively. 7 Although the rate for Taiwanese rice in 1917–23 was a negative value and was 17.6
percent lower than domestic rice, it turned into a positive value and had a difference of only 3.5 percent
to the domestic rice in 1934–39. Taiwanese rice improved in quality and thus reduced the quality
difference against domestic rice. The ratio of Hōrai-mai to the total volume of rice exported from
Taiwan increased from 44.4 percent in 1925 to 75.9 percent in 1936 (Ministry of Agriculture andForestry, Rice Bureau 1937b, pp. 66–67). As a result, the price gap between Taiwanese and domestic
rice reduced, and the peculiar price trend of Taiwanese rice disappeared. However, there was still a
difference in quality between Korean and Taiwanese rice. This difference affected colonial rice pricing.
After 1933, Korean rice prices often surpassed domestic rice prices and remained at a level
higher than Taiwanese rice prices (see Figure 2). Under this situation, Korean rice pricing marginallyaffected not only Taiwanese rice pricing but also the pricing of domestic rice in the futures and spot
markets. It denotes that colonial rice pricing began to influence the futures pricing of domestic rice. By
contrast, Taiwanese rice pricing still did not influence the pricing of the other rice, including in the
futures trading. We also observe these facts from the RVCs shown in Figure 8.
All RVCs for the third period are different from the second period. The pricing in the futures
market was partly influenced by Korean rice pricing whereas it was almost independent of other prices.
In the same manner as the futures market, the pricing of domestic rice in the spot market was also
affected by Korean rice pricing.
For the RVC of domestic rice prices in the spot market, the percentage of the futures prices
decreases from about 60 percent in the second period to about 20 percent in the third period. At the
beginning of the third period, the government established the Rice Control Law allowing the authorities
to buy and sell physical rice to control the price of domestic rice. This law caused futures trading toshrink and impaired the functions of the futures market (see Table 1 and Appendix Figure 1). However,this measure had a limited effect on colonial rice pricing.
The Ministry of Agriculture and Forestry constantly intervened in the rice spot market tocontrol domestic rice prices according to the Rice Control Law. The first article of Beikoku Tōsei Hō
Shikō Rei (the Order for Enforcement of the Rice Control Law) limited the target of the government’s
price control to only domestic rice. Hence, the government attempted to stabilize the domestic rice
prices through its frequent interventions, and the colonial authorities controlled the shipping volume ofcolonial rice to Japan (Ota 1938, p. 742). The colonies were smaller in their scale of interventions thanthe metropole. Furthermore, the colonial authorities intervened in the rice market only in 1934, as we
7

As in footnote 6.
23

Futures ---> Futures

Spot_Korean ---> Futures

Spot_Domestic ---> Futures

Spot_Taiwanese ---> Futures

.02

.02

.02

.02

.01

.01

.01

.01

.00

.00

.00

.00

-.01

-.01
1

2

3

4

5

6

7

8

9

-.01

-.01
1

10

2

Futures ---> Spot_Domestic

3

4

5

6

7

8

9

10

1

2

Spot_Domestic ---> Spot_Domestic

3

4

5

6

7

8

9

10

1

Spot_Korean ---> Spot_Domestic

.02

.02

.02

.01

.01

.01

.01

.00

.00

.00

.00

2

3

4

5

6

7

8

9

10

1

2

Futures ---> Spot_Korean

3

4

5

6

7

8

9

1

10

2

Spot_Domestic ---> Spot_Korean

3

4

5

6

7

8

9

10

1

.02

.02

.01

.01

.01

.01

.00

.00

.00

.00

-.01

-.01

-.01

-.01

-.02
2

3

4

5

6

7

8

9

10

-.02
1

Futures ---> Spot_Taiwanese

2

3

4

5

6

7

8

9

2

Spot_Domestic ---> Spot_Taiwanese

3

4

5

6

7

8

9

10

1

Spot_Korean ---> Spot_Taiwanese

.02

.02

.01

.01

.01

.01

.00

.00

.00

.00

-.01

-.01

-.01

-.01

2

3

4

5

6

7

8

9

10

1

2

3

4

5

6

7

8

9

10

2

3

4

5

6

7

8

9

Figure 7
Impulse Response Functions from November 1933 to August 1939
24

7

8

9

10

3

4

5

6

7

8

9

10

2

3

4

5

6

7

8

9

10

.02

1

Note: As in Figure 3.

6

Spot_Taiwanese ---> Spot_Taiwanese

.02

1

5

-.02
1

10

4

Spot_Taiwanese ---> Spot_Korean

.02

1

2

Spot_Korean ---> Spot_Korean

.02

-.02

3

Spot_Taiwanese ---> Spot_Domestic

.02

1

2

10

1

2

3

4

5

6

7

8

9

10

Spot_Domestic

Futures
100

100

80

80

60

60

40

40

20

20

0

1

2

3

4

5

6

7

8

9

0

10

1

2

3

4

Spot_Korean
100

80

80

60

60

40

40

20

20
1

2

3

4

5

6

6

7

8

9

10

7

8

9

10

Spot_Taiwanese

100

0

5

7
Futures

8

9

0

10

Spot_Domestic

1

Spot_Korean

2

3

4

5

6

Spot_Taiwanese

Figure 8
Relative Variance Compositions from November 1933 to August 1939
Note: As in Figure 4.

25

mentioned in Section 4. Consequently, these interventions had a lesser impact on colonial rice pricing,
and this pricing changed in the third period.
For the RVC of Korean rice prices, the percentage of itself surges from about 20 percent in
the second period to over 60 percent in the third period. Korean rice pricing strengthened its
independence from other prices and increased its effect on Taiwanese rice pricing. The impact of Koreanrice pricing appears in the RVC of Taiwanese rice prices. However, Taiwanese rice pricing did not affectKorean rice pricing. That is, Korean pricing had a one-way effect on Taiwanese rice pricing.
The GGT’s measures certainly improved the rice quality. Taiwanese rice caught up withdomestic rice in quality, and its property altered from mixed diets to principal ones in the 1930s(Kawano 1941, p. 299; Tokyo Rice and Merchandise Exchange 1934, p. 105). Hence, Taiwanese rice
became a substitute good for domestic rice. Nevertheless, the differences in quality and price level withrespect to the other rice still existed even after the middle of the 1930s. For this reason, Taiwanese ricepricing did not affect the pricing of the other types of rice.

7

Conclusions

Until the beginning of the 1930s, colonial rice pricing did not affect the pricing of domestic rice.
Colonial rice was inferior in quality to domestic rice, and the consumers assessed both types of rice as
separate goods. Furthermore, there was a difference in quality among colonial rice. Taiwanese rice wasof a lower quality than Korean rice, and the pricing of the two types of colonial rice did not affect eachother. Korean rice was a substitutional good to domestic rice whereas Taiwanese rice was only acomplementary good. The nature of the domestic rice market was not stable and altered with the quality
improvement of colonial rice.
After the mid-1930s, domestic and colonial rice had partially influenced each other in the
futures and spot markets. The GGK’s measures improved the rice quality in Korea, and Korean rice
prices frequently surpassed domestic rice prices during this period. With this change in the relative
relationship of prices, the influence of domestic rice pricing on Korean rice pricing was reduced.
Nevertheless, Korean rice pricing began to affect Taiwanese rice pricing and the pricing of domestic
rice in the futures market. The GGT followed the GGK’s lead and improved the quality of rice in Taiwan,
and the price gap between domestic and Taiwanese rice shrank. Accordingly, Taiwanese rice became asubstitutional good to domestic rice from a constitutional one.
Rice was one of the significant primary products from the colonies and was one of theprincipal colonial goods for export to the metropole within the Japanese Empire. It is a staple food inJapan, and the government and the colonial authorities devoted tremendous efforts to improving the
production and distribution of colonial rice. Nevertheless, decades were needed to increase the colonial
rice consumption to satisfy the demand in Japan.
Japan procured not only rice but also other agricultural products such as soybeans, barley, andwheat from its colonies. These commodities accounted for a large portion of colonial trade and weredifferent in quality to domestic products since the botanical varieties differed by region in the empire,
which spread across three climate zones. Hence, the government often struggled to handle the quality
26differences between domestic and colonial goods, including rice. This attempt required considerable
time, and the Japanese Empire, which collapsed in nearly half a century, had a limited amount of time
to fully utilize its colonies as suppliers of primary commodities. In this manner, the Japanese Empire
sacrificed about 40 years to become “the world’s largest empire.” However, when the government
reaped the harvest, its measures caused not only an expansion of colonial commodity consumption but
also an alteration in the structure of the domestic commodity market. The forging of a closer relationshipamong the regions within the empire structurally transformed both the colonial economies and themetropole’s economy.
As we mentioned in the introduction, previous literature on imperialism pays close attention
to how the metropole’s actions affected the colonial societies. In contrast to the previous studies, we
maintain that the history of imperialism should extend its view in the opposite direction and examine
the effect within the empire. By adding this perspective, we will capture the mutual relationship between
the metropole and the colonies as a cyclic structure to acquire more a profound historical understandingof imperialism.
A limitation of this study is that we investigate only the rice market in Tokyo. Japan imported
not only grain but also mineral resources such as coal and iron ore. Even other Western imperial
countries, which had lower degrees of colonial trade linkage than Japan, procured primary products
from their colonies. Further research will be necessary to analyze the cases of other commodities andother imperial countries.

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31

Appendix Table 1
Results of Cointegration Tests
January 1917–August 1923
Trace

November 1923–October 1933

Max Eigen

Trace

November 1933–August 1939

Max EigenTrace

Max Eigen

Eigen-

Test

CV

Test

CV

Eigen-

Test

CV

Test

CV

Eigen-

Test

CV

Test

CV

value

Stats

(1%)

Stats

(1%)

value

Stats

(1%)

Stats

(1%)

value

Stats

(1%)

Stats

(1%)

None

0.3163

79.47

71.48

29.28

37.49

0.2739

74.61

71.48

36.81

37.49

0.3570

77.42

71.48

29.59

37.49

At most 1

0.2539

50.19

49.36

22.55

30.83

0.1575

37.79

49.36

19.71

30.83

0.2509

47.84

49.36

19.36

30.83

At most 2

0.2164

27.65

31.15

18.78

23.98

0.0843

18.08

31.15

10.13

23.98

0.2411

28.48

31.15

18.48

23.98

At most 3

0.1088

8.87

16.55

8.87

16.55

0.0668

7.95

16.55

7.95

16.55

0.1386

10.00

16.55

10.00

16.55

Notes: “Trace” and “Max Eigen” denote the results of Johansen’s (1991) trace test and the results of Johansen’s (1988) maximal eigenvalue test, respectively. “TestStats” in the “Trace” and “Max Eigen” columns means the trace statistics and the maximum eigenvalue statistics, respectively. “CV (1%)” is the critical value
at the 1% significance level for each test. EViews 12 was used to compute the statistics.

32

Appendix Figure 1
The Trading Volume of Rice in Japan’s All Exchanges, January 1910–August 1939
Sources: Ministry of Agriculture and Commerce (1912–23); Ministry of Agriculture and Forestry, Rice
Bureau (1935a, p. 11; 1935b, p. 11); Tokyo Stock Exchange (January 1923–August 1939); The“koku” is a standard unit of measurement in the Japanese agriculture and one koku is equal to 180.39
liters. The volume of other exchanges in 1922, the volume of the Tokyo Rice and Merchandise
Exchange in August–November 1923, and the volume of all exchanges in October 1925 and June
1929 were unknown because the data sources are missing.

33