January 30, 2012

Tokyo Grain Exchange mulls dissolution in FY 2012

Due to its deepening business slump, the Tokyo Grain Exchange (TGE) has started considering dissolving itself in fiscal 2012 that begins in April, informed sources said on Friday (Jan 27).

The plan, which came to light at the day's gathering between TGE executives and officials of relevant organisations, will be submitted to the exchange's board meeting on February 21 for approval, according to the sources.

The grain futures exchange has been talking with the Agriculture, Forestry and Fisheries Ministry since late last year about a possibility of transferring its listed commodity futures to the Kansai Commodities Exchange in Osaka, western Japan, the sources said.

But is appears difficult for the Kansai exchange to take over corn and soy futures, whose demand is high as international commodities, because its trading system is very old, the sources said. As a result, only rice and "azuki" red bean futures will likely be transferred to the Kansai exchange, the sources added.

According to the sources, the Tokyo Commodity Exchange, or TOCOM, may be asked to take over corn and soy from the TGE. In December 2010, the TGE decided to shut by transferring all of its listed commodities to TOCOM.

But in line with plans to resume rice futures trading in the nation for the first time in some 70 years, the Agriculture Ministry urged the TGE to take responsibility for managing the product. The TGE's decision to liquidate itself was thus withdrawn.

However, turnover on the TGE continued faltering even after rice futures trading started on the exchange in August 2011, hitting a 37-year low for the whole of last year.

In April-September 2011, the TGE, which was established in 1952, incurred a net loss of JPY168 million (US$2.2 million). For the full year to March, the exchange is expected to report a loss of JPY570 million (US$7.4 million).