In the history of TOCOM, there were many big incidents and events, however, one major incident at the time of its establishment was the resignation of the president, Kaei Watanabe midway through his term. It was the scenario in which the president who was in conflict with commodity futures traders, was forced to resign. To be more specific, it was a view as an off-field brawl as a result of deepening grudge between the president Seiki Shimizu of Kanetsu Shoji Company, who was the industry leader at the time, and the president, Watanabe. The president Watanabe was from the Ministry of International Trade and Industry (MITI)－the Ministry of Economy, Trade and Industry at present(METI)，and it was an unprecedented incident in which the head of the exchange was forced out of his position due to a dispute with the traders.

Mr. Daisuke Kihara who served as a director of Japan Commodity Futures Traders Association had mentioned “The resignation issue of the president, Kaei Watanabe of TOCOM” in his book “Wind and clouds in the futures 50 years” as an unavoidable problem when talking about 50 years in the commodity futures industry. Mr. Watanabe was such a great president that he became the first president of Tokyo Gold Exchange, the predecessor of TOCOM.  He resigned in June 1987 and his tenure as president of TOCOM was 6 years and 3 months. During the period, there were some conflicts between him and the commodity futures traders. Regarding the resignation issue, Mr. Kihara was talking　“I could write a book in detail”, and a letter containing details of the conflicts in those days was delivered to him. Our Futures Tribune quotes the contents of the letter because it states the issue succinctly.

1. For the past two years, there are constant conflicts between TOCOM―the president Watanabe－and the commodity futures industry. A dispute between the commodity futures traders in Kanto district and TOCOM finally came to light a month ago, and the situation is currently difficult to bring under control.
2. A key to the issue is that there is the following dispute regarding the computerization of two exchanges, TOCOM and Tokyo Grain Exchange (TGE):
3. The two exchanges are proceeding with computerization separately. TOCOM is spending 3 billion yen on continuous trading and TGE is spending just under 1 billion yen on call auction trading. Therefore, it will be a double investment in the commodity futures traders which belong to the both exchanges, and the traders will not be able to bear the expense burden.
4. Especially, the plan of TOCOM’s computerization isn’t based on the consensus of the members, and almost completely, the plan is proceeding without the members, so members aren’t satisfied.
5. Also, budget measures related to the plan of TOCOM’s computerization are arbitrary, so the commodity futures traders involved in the issue can’t forgive it.
6. To be more specific, regarding TOCOM’s operating expenses of 3 billion yen, TOCOM explains　“We will not cause any trouble to the commodity futures traders and will cover it with the exchange’s expenses”. However, it is wrong. Because, for example, as for the exchange budget of 1 billion 350 million yen in 1986, its revenue was approximately 2 billion 400 million yen and approximately 1 billion 50 million yen was left as a surplus, which covered the computer costs. However, as for the exchange revenue－approximately 1 billion 50 million yen, its corporate tax is nearly 55 percent as it is for companies, so the remaining money will be used for the business expenses. Therefore, the business costs that could be covered with 3 billion yen actually cost nearly 7 billion yen.
7. So, the commodity futures traders insisted that before the settlement of accounts, the exchange returns the surplus to them, and that if the computer expenses are required, by recording it in the budget as a special business expense from the beginning, no need to pay unnecessary taxes. However, the president Watanabe stubbornly refused to listen to it. In addition to it, he acted violently in a way that upset the feelings of the commodity futures traders with pettifogging legal interpretation.
8. A similar budget problem also existed in FY 1985. In FY 1985, as for the surplus of approximately 800 million yen, although the commodity futures traders asked TOCOM to refund its appropriate amount and some leaders of the commodity futures traders enthusiastically persuaded the president Watanabe, and despite the arbitration by MITI, TOCOM only refunded 100 million yen. Moreover, at that time, even though he promised that he would not do anything like that from next year onwards, he got into trouble again in FY 1986 for something similar.
9. This TOCOM ’s arbitrary attitude was also an issue for　“Special security deposit regarding penalty” two years ago. Also, regarding the issue of proprietary trading by commodity futures traders, etc., there was a conflict between 15 other exchanges and TOCOM, and things got out of control. (the quote ends here）

In 1987, although there were a series of progressive topics promoting internationalization for the commodity futures trading industry in Japan, the resignation of the president Watanabe was treated as the biggest incident. His resignation was on June 30 and the reason for his resignation was ostensibly due to health reasons. However, everyone involved in the industry knew the story leading up to his resignation.

This resignation seems to have been quite a shock to MITI because, in principle, MITI didn’t allow the resignation during the term. Although the cause-and-effect relationship is unclear, the chief of the division in charge at the time soon quit MITI after the incident.

As stated in the above letter, the main cause of the conflict was the issues of the computerization and the shift from call auction trading to continuous trading. The cause of the decisive deepening of the conflict between the commodity futures traders and the president Watanabe was a notification called “Watanabe memo” and it was when the memo was distributed to the commodity futures traders, TOCOM’s members.　It indicated his policy, whose main contents: Ⅰ.The surplus of fixed-rate membership fees will not be refunded but will be allocated to internal reserves. Ⅱ.The computerization will be carried out. Therefore, his one-sided approach caused strong opposition from some of the commodity futures traders.

However, looking back now, his policy would have been reasonable in light of the prevailing trends at the time. Until that time, the commodity futures industry in Japan had little negotiation with the rest of the world, and as a result, it was in a state of isolation. Considering stepping into internationalization, it is a natural action for head of the exchange to try to secure the funds for the anticipated investment. The computerization and the transfer to continuous trading were in line with global standards. Rather, there would have been more emotional resistance at the root of the conflict.

(to be continued)

（Futures Tribune・issued November 26, 2024 ・no.3327）