The present system of wholesale market in Japan has two features: (1) Local governments found and manage their central wholesale markets. (2) Prices are fixed on the basis of auction regardless of volume of transaction. This is an unique system the world; the law restricts transactions in the markets to maintain impartiality.
Before central wholesale markets were established, although auction had been held partially in vegetable markets, most prices had been negotiated in secret between sellers and buyers. It sometimes caused unfair transactions and placed producers and consumers under disadvantages.
The principle of public auction established by the Central Wholesale Market Law had a marked effect on distribution of perishable foods: fair prices and proper transactions are ensured. Thus, thanks to the central wholesale market, producers and consumers have become able to supply or consume perishable foods without anxiety.
It is obvious, however, that the central wholesale markets are faced with serious difficulties. Vegetable-producing districts have been expanding and big firms have been making inroads into retailing since the later 1960's. Big producing districts have come to supply their products through agricultural cooperatives to the central wholesale markets in big cities because it is advantageous to them from the standpoint of price. As a result, to meet the shortage, products must be daily forwarded from central wholesale markets in big cities to local central wholesale markets in time for the start of auction. Meanwhile, large demanders such as volume retailers have pursued direct transactions with producing districts including foreign countries instead of taking part in auction which would not offer them any benefit form large transactions. These conditions have exercised a considerable impact on transactions based on auction in central wholesale market.
The Law was intended for minor producers and retailers, but the both producers and retailers have been growing big. The central wholesale markets, responsible for establishing a link between producers and retailers, have to meet with this situation.