Building Kanmon Commodity Exchange

Of “Kanmon－Zei”in the commodity futures industry in Japan, Kanmon is a region in western Japan and Zei means group, and it was a group that had belonged to Kanmon Commodity Exchange－no longer exists. The group moved their sales offices to Tokyo, and with the human-force tactics of sales so-called “Organized sales”, the group quickly became a leading player in the commodity futures market. With commodity futures boom that started with a famous novel “Red Diamonds”, that means red beans listed on some commodity futures exchanges in Japan in those days, the popularization of commodity futures trading has progressed. As a result, the period from 1965 to 1974 was the era when the “Kanmon－Zei” was on the rise, and its existence can be said to have had an influence on the commodity futures industry in Japan, even later. In the current situation where there are only two commodity futures exchanges in Tokyo and Osaka, it is almost forgotten that there was even an exchange in western Japan. So let’s look back on the history of the dominant group called “Kanmon－Zei”and its organized sales.

Securities men who aimed to become the main character of “Red Diamonds”

It was 1962 when the author of “Red Diamonds” has published his novel set in the red bean market. Next year, the novel was made into a movie, and as a result, it became a trigger for the popularization of commodity futures trading. The story of the novel took place during the red bean market from June, 1954 to May, 1955. In reality, due to the stock market crash of 1953, many salespeople in the securities industry switched to the commodity futures industry at the dawn of the postwar period. Securities men at the time were well versed in stock futures trading of the Exchange Act－the prewar laws and regulations, so it was easy for them to turn to commodity futures trading. Rather, the three securities principles issued by General Headquarters of the Allied Forces prohibited securities futures trading, so it was lucky for securities men with a strong focus on futures. However, it was difficult financially for the businessmen who have recently turned to the commodity futures trading industry to become licensed agencies on commodity futures exchanges. So most of them had no choice but to operate as affiliated contractors who transfer consignment orders of customers to authorized licensed agencies.

Many of these affiliated contractors were mainly active in western Japan and the reason for this was that it was difficult for the competent authorities, the Ministry of International Trade and Industry (MITI) and the Ministry of Agriculture, Forestry and Fisheries (MAFF) to monitor affiliated contractors. In addition, western Japan belonged to the Kansai Economic Area where Osaka is located, and although most of these affiliated contractors used Osaka Grain Exchange as their main place of activity, major licensed agencies on the exchange had already expanded their branches and branch offices to major cities in western Japan such as Fukuoka.

Therefore, affiliated contractors had no choice but to belong to small and medium-sized licensed agencies on Osaka Grain Exchange, and they were in a difficult situation where they were forced to compete with major licensed agencies. Although this background may have influenced, gradually, a disorganized sales attitude by the emerging group became noticeable and Osaka Grain Exchange was no longer able to deal with the behavior of affiliated contractors. Furthermore, many of small and medium-sized licensed agencies on Osaka Grain Exchange went bankrupt and many affiliated contractors lost their jobs.

Meanwhile, businesses aiming to become independent have also appeared and they aimed to become regular licensed agencies on Kanmon Commodity Exchange from around the fall of 1958. At the time, the exchange was deserted and no business was being done in its market. Probably, they couldn’t compete with existing licensed contractors on Osaka Grain Exchange  in terms of scale of business. However, as continuing Kanmon market-based business for a year or two, former affiliated contractors gradually gained strength. Then, they aimed to expand the scale of their business and their next step was to expand to Tokyo. The reason why they skipped Osaka and expanded into Tokyo, although they sometimes wanted to avoid being treated as heretics in Osaka, there is no doubt that they had a longing for Tokyo even more.

Rise of “Kanmon－Zei”－ many disputes with customers in　organized sales

The period from 1965 to 1974 can be said the era when “Kanmon－Zei” was gaining momentum across the country. In terms of sales results, it may be closer to Alexander the Great’s Eastern Expedition than Great migration of Germanic peoples. The great success by Kanmon－Zei is said to  have been due to human-wave tactics，so-called organized sales.

Before the rise of Kanmon－Zei, in major markets around the country, traditionally, the main focus was on a local sales method called “Commission sales”. It was an independent sales method, and some still remain today. In those days, a salesman  was reimbursed 25－35% of customer’s trading fee from the salesman’s company and he used to make a living from it. Commission sales was once widely adopted in the United States and Hong Kong. The advantage for the company was that labor costs could be kept low.

Moreover, because the profit direction of the customer and the salesman are the same, customer-oriented sales came into practice naturally. In a sense, organized sales is the opposite of commission sales, and organized sales was a method of forcing the mass-hired university graduates to dive into sales. Although it is said that there have been some licensed agencies using this method since around 1960, because they were small and some of them valued order,  so they didn’t stand out.

Organized sales was a sales style that adopted only “Mass sales” from the marketing method called “Mass production and Mass sale” that were popular in the early 1960s. In addition, television advertisement was used together. Therefore, performance has improved dramatically. In the commodity futures industry, the organized sales that became Columbus's egg naturally spread to other licensed agencies, and as a result, this has become a major factor in the sudden increase in disputes with customers since 1963.

(to be continued)

（Futures Tribune・issued February 4, 2025 ・no.3339）