Function of Japan Vegetable Markets(Part1)

We have analyzed how vegetable market price behaves,now we will go through how vegetable market works in Japan.

History of vegetable markets

The central wholesale market was organized based on the law published in 1923.
It was just after Bubble boom (1919-1920) due to World First War(1914-1918) which Japan did not participate in.
Japan was being industrialized at that time,then the population was flowing into urban area from farm villages, for which the stable food distribution system was required.
There was a National-scale people riot in 1918 due to the remarkable price rise because of rice corner by merchants etc. so that food distribution system needed to be fair, appropriate and transparent.

Here are the main principles for the two types of wholesale dealers in market, Oh-Oroshi and Naka-Orosi.
(Oh-Oroshi is rather supply side and Naka-Oroshi is demand side to make deals.)

1)Oh-Oroshi specializes in consignment sales
In order to avoid corner or haggling acts to farmers
(Oh-Oroshi cannnot refuse the consignation request from farmers due to the same purpose, as well.)

2)Oh-oroshi is not allowed to trade vegetables for its own sake
In order to avoid manipulating prices unreasonably

3)Fixed commission rate for Oh-oroshi
In order to make Oh-Oroshi business transparent

4)Auction trade is required between Oh-Oroshi and Naka-Oroshi
In order to make their deals transparent

5)Vegetables need to be in place when auction is made
In order to avoid misleading vegetables to be traded



Functions expected for vegetable markets

There are mainly four functions of vegetable markets

1)Hub for vegetable distribution from farmers to retail stores
Picking up from farmers and shipping for retail stores

2)Price discovery
Discovering fare and appropriate price in the transparent system

3)Smooth cash settlement
Taking over each participant’s creditworthiness

4)Intermediation between farmers and consumers deliver each message
Delivering each side information,requirement for another


Next Contents : Function of Japan Vegetable Markets(Part2)
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