Hello players. I have some bad news. The global economy appears to be going through a rough patch, with markets all over the world falling. As the kids say, it lacks aura. Wall Street has lost a lot of its energy. As a video game site, this may not be relevant news to you, but it definitely is. Stock valuations for companies like Nintendo, Sega, and Capcom have declined as a result of this historic crash. This article explains why, before video game terminology threatens to serve as the starting gun for a global recession.
Let’s start with Japan, like Capcom and Nintendo. Both companies were doing extremely well ahead of today’s event! Nintendo is about to release the Switch 2, so you should feel at ease now. Meanwhile, Capcom has been on a winning streak in recent games, and its stock price has surged as a result. The yen may have been weak in recent years, but even there are signs of improvement. All of this sounds like a great time to be a Japanese game developer – Kenzo Tsujimoto should be drinking champagne in the penthouse.
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But he certainly wasn’t today. Capcom’s stock is down about 16%, Nintendo -15%, Sega -13%, Nexon -13%…etc. Because the problem is not the Japanese video game industry, but the Japanese stock market itself! You’ve seen the recession onion – layer after layer. By the close, Japan’s Nikkei share average, considered a single indicator of overall market health, was down more than 12%. It’s worth noting that a rising yen may actually hurt the market here because of the accompanying rise in interest rates.
But it’s worse than that! This isn’t even a Japan-specific problem, as there’s another layer to the onion that covers much of Asia. South Korea was also hit hard, with its biggest decline since 2008 (you may have heard of the global financial crisis caused by the greedy behavior of big banks). The situation got so bad that the South Korean market activated a circuit breaker – a failsafe mechanism that halts trading for 20 minutes when valuations fall below a certain milestone.
All of Asia was hit by this sudden financial collapse, but why? Well, it’s all America’s fault! You see, countries are financial islands that operate independently of each other. Many times, they are directly affected by each other’s performance. When economically well-connected countries do well, a rising tide does lift all boats. But the opposite is also true, and a decline in one country can have knock-on effects on countries that rely on it. Look at the Eurozone crisis in 2009, when Greek corruption and financial folly nearly brought the rest of the Eurozone to its knees. In video game terms, imagine holding a position in Counter-Strike, but the idiot occupying the middle keeps getting dunked on. Winning rounds is a little difficult when one person on your team is a bit of an alcoholic. A collapse in the US stock market means a collapse for everyone trading in US dollars, and guess what, the US dollar is extremely popular in global markets.
The specific relevance of this to Asian stock markets right now is that the U.S. economy appears to be getting closer to an official recession. Recent data has shown that markets are underperforming, which in turn has spooked investors who have responded by pulling money out of the market and hedging their bets against financial disaster. Interestingly, looking at stocks and the way markets work, this in itself triggered a financial disaster that caused the U.S. stock market to fall. Investors are pulling out of areas they see as risky, and the biggest losers this time are technology. It just so happens that technology is one of the largest markets in the region—it includes hardware, software, and even video games.
As for why technology has been hit hard? Well, this is an industry that is very promising in the US market. There has been huge investment in tech companies that are driving advances like artificial intelligence and virtual universes, but these companies have lost money. Think about it: Billions of dollars have been invested in artificial intelligence projects like OpenAI, but how do these companies actually make money? How do they generate revenue? They don’t do this. Recent deals in the technology industry have been more about building financial stakes in technology, Can Proving profitable, but not yet. As the U.S. inches closer to a recession, perceptions of such businesses have grown colder. If you want a perfect example of how well the U.S. tech industry is doing, Intel’s CEO tweeted a Christian scripture after his company’s stock price dropped more than 50%.
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For League of Legends players, think of it this way. Buying Mejai in League of Legends might be a bold idea when your record is 1/0/0, but selling him 10 minutes later when your record is 1/7/0 is probably a good idea . When things look bad, you give up on ambitious bets and keep your head down. Remember when Sony invested about $1 billion in Epic’s Metaverse project? How much money did they actually make back from it? Can they come back? Probably not!
The widespread panic about the tech industry means that the tech industry—both in the U.S. and globally—is bearing the brunt. Add to that the global decline that typically occurs when U.S. markets fall, and you get a combination that frankly hits Japan (and other profitable and successful companies like Capcom and Nintendo) in the dust. Finally, we reach the surface of this financial onion, which has a large American flag generated by artificial intelligence.
As for what this means to you? Well, I know you like video games. I write about them and am definitely not here to provide financial advice. But even so, I’ll probably hold off on buying any cosmetics or battle passes for now, maybe setting aside a little more money. If you’ve been itching to try a free game, now might be a good time!
