  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.
