The God of Markets: How One Rice Trader Became Japan's Richest Man

If you ever opened a stock trading app, you probably saw those red and green bars on the price chart. They are called candlestick charts. Every trader uses them today. Every finance app shows them. And they were invented by a Japanese rice trader in the 1700s.

Chapter 2 of “From Tulips to Bitcoins” by Torsten Dennin takes us to Japan. Specifically to the Dojima rice market in Osaka. This is where futures trading was born, long before anyone in Amsterdam, London, or Chicago even thought about it.

Rice Was Money

Japan entered the Edo period in 1603. Longest stretch of peace the country had seen. Domestic trade and agriculture grew strong. But Japan did not have a common currency. So what did people use instead? Rice.

Rice was how you paid taxes. How feudal lords measured their wealth. Traded for silk and tea. If you had rice, you had money.

The Dojima rice market opened in Osaka in the late 1600s. It started simple. But it did not stay simple for long.

The Birth of Futures Trading

Feudal lords needed cash. They could not always wait for the harvest. So warehouses started accepting warrants for future rice delivery. Basically, a piece of paper that said “this is worth X amount of rice that will be delivered later.”

These rice coupons started to have a life of their own. People traded the coupons without ever touching actual rice. The paper moved from hand to hand, changing price along the way. Sound familiar? It should. This is exactly how futures contracts work today.

And it got crazy. By the mid-1700s, traders at Dojima were trading four times more rice in coupons than all the physical rice that existed in Japan. In 1749, about 100,000 bales were being traded on paper. But only 30,000 physical bales existed in the entire country.

Three out of every four bales traded were just numbers on paper. Dojima became the first modern futures exchange in the world. Before Amsterdam. Before London. Before Chicago. It all started with rice in Osaka.

Enter Homma Munehisa

In 1750, a 36-year-old man named Homma Munehisa took over his family’s rice trading business. His family owned large rice fields in northwest Japan. This gave him something nobody else at the exchange had. Real information about harvests straight from the source.

But Homma went further. He built his own communication network covering 600 kilometers. Runners and signal stations giving him harvest information faster than anyone else. While other traders at Dojima were guessing, Homma already knew.

The Invention of Candlestick Charts

Homma did not just rely on insider knowledge. He was also a pattern guy. He started drawing charts that showed four things at once: the opening price, the closing price, the highest price of the day, and the lowest price. The shape looked like a candle with wicks on both ends.

His idea was simple but powerful. If you study how prices moved in the past, you can get clues about where they go next. This was technical analysis 200 years before anyone gave it a name.

Cornering the Market

Here is the legend of how Homma made his biggest move. Dennin tells this story in the book and it reads like a thriller.

For several days in a row, Homma kept buying rice at the Dojima exchange. Buying and buying. Other traders watched him, confused. He would pull a piece of paper from his pocket with strange candle-like symbols drawn on it. Nobody understood what he was looking at.

On the fourth day, a messenger arrived at the exchange with news. A massive storm had destroyed rice crops. Harvest losses were severe. The price of rice shot up immediately. But there was almost no rice left to buy. Homma had already bought it all.

He had cornered Japan’s entire rice market.

God of Markets

After Dojima, Homma moved to Edo, which is now Tokyo. His reputation was so big that people gave him the nickname “God of Markets.” He was raised to aristocracy and served as a financial advisor to the Japanese government.

The rice trader from northwest Japan had become one of the richest and most powerful people in the country. He died in 1803, and his trading methods were mostly forgotten.

Then about 200 years later, Western traders rediscovered his candlestick charts. Today they are the default on every trading platform in the world. Every time you look at a stock chart with those red and green bars, you are looking at a technique from a Japanese rice trader who cornered a market in 1750.

What I Take From This

Two things stand out to me. First, the idea of trading things that do not physically exist goes back almost 300 years. People worry about modern derivatives being disconnected from reality. But Dojima traders were doing the same thing in the 1700s with rice coupons.

Second, information advantage wins markets. Homma did not just get lucky. He built an entire communication system to know things before everyone else. Today we have algorithms and fiber optic cables to shave milliseconds off trade execution. The technology changed. The game did not.

Previous: Chapter 1: Tulip Mania

Next: Chapter 3: California Gold Rush

This is part of my From Tulips to Bitcoins book retelling series.