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Hello gamer. I have some bad news. It looks like the global economy is having a bit of a rough time, with markets all over the globe taking a tumble towards the red. It’s lacking aura, as the kids say. Wall Street has lost much of its rizz. As a video game website, this may not seem like relevant news to you, but it absolutely is. Companies like Nintendo, Sega, and Capcom have seen a decrease in stock valuation as a result of this historical crash. This article will go through the why of it all, ahead of what could be the starting gun of a global recession, in video game terms.
Let’s start in Japan, with the likes of Capcom and Nintendo. Prior to today’s events, both companies were doing very well! Nintendo, on the verge of releasing the Switch 2, should be sitting comfortable right now. At the same time, Capcom has been on one hell of a winning streak with recent games, and had sharp stock rises as a result. The Japanese yen may have been weak in recent years, but even this was showing signs of improvement. All this makes it sound like it’s a great time to be a Japanese game dev – Kenzo Tsujimoto should be drinking champagne in a penthouse suite.
But he certainly isn’t today. Capcom has seen a stock decrease of roughly 16%, Nintendo -15%, Sega -13%, Nexon -13%… etc etc. No matter how good a video game company is doing, it’s been hit hard. This is because the problem isn’t with the video game industry in Japan, but the Japanese stock market itself! You’ve got the onion of economic downfall here – layers upon layers. As of market close, the Japanese Nikkei – think of this as a single marker of overall market health – sank by over 12%. It’s worth noting that the value increase of the Yen may have actually hurt the market here, as with it came an increase in interest rates.This is the largest drop since 1987 for the Nikkei – bad news!
But it’s even worse than that! This isn’t even a Japan-specific problem, as the onion has another layer that covers much of Asia. South Korea has been hurt badly too, with its largest drop since 2008 (the worldwide financial crisis you may have heard about caused by greedy practices from big banks). It got so bad that the South Korean markets activated circuit breakers – a failsafe that pauses trading for 20 minutes when valuation falls below a certain milestone.
Asia as a whole is feeling the brunt of this sudden financial implosion, but why? Well, it’s kind of America’s fault! You see, countries are financial islands, operating independently of each other. Often times they’re directly affected by each other’s performances. When countries linked financially do well, a rising tide can indeed lift all ships. But the opposite is also true, one country having a tumble can have knock on effects on countries dependent on it. See the Eurozone crisis in 2009, where Greece’s corruption and financial tomfoolery almost sank other countires in the Euro. In video game terms, imagine holding a site in Counter Strike, but the bozo holding mid keeps getting dunked on. It’s kinda hard to win rounds when one of your team is a bit of a stoner. America’s stock market crumbling means everyone who trades on or with the US dollar crumbles, and guess what, the US dollar is very popular in global markets.
How this relates to the current Asian stock market specifically is that the US economy seems to be lurching closer and closer to an official recession. Recent data shows that the market isn’t doing very good, which in turn spooked investors who reacted accordingly, pulling money out of places and hedging their bets for financial disaster. Funnily enough, with how stocks and markets work, this in itself caused a financial disaster with US stocks dropping as a result. Investors are pulling out of areas they believe are risky, and the biggest loser this time around is the tech sector. It just so happens that tech is one of the biggest markets in the region – it includes hardware, software, and, yes, even your video games.
As for why tech is being hit hard? Well, it’s been an industry the US market has been very bullish on. People have invested heavily in tech companies pushing advancements like AI and the metaverse, which have all hemorrhaged money. Think about it: billions of dollars has been invested into AI programs like OpenAI, but how do these companies actually make money? How do they generate revenue? They don’t. Recent trading in the tech sector has been more about establishing a financial stake in technology that could prove profitable, but hasn’t. And with the US coming closer to a recession, opinions on such ventures have gone to the dogs. If you want a perfect example of just how well the US tech sector is doing, the CEO of Intel has tweeted Christian scripture after his company dropped over 50%.
For League of Legends players, think of it this way. Buying a Mejai’s in League of Legends might be bold when you’re 1/0/0, but it’s probably a good idea to sell it when 10 minutes later you’re 1/7/0. When things look bad, you drop the ambitious bets and bunker down. Remember when Sony invested around one billion dollars into Epic for metaverse projects? What actual money have they made back from that? Will they ever make it back? Probably not!
A widespread panic departure from tech means that the tech sector – both in America and worldwide – has taken the brunt of the hit. Add on top of that the usual global drop when the US market drops, and you’ve got a combo that has frankly knocked Japan (and otherwise profitable and successful companies like Capcom and Nintendo) on their arses. Finally, we’ve reached the surface of this financial onion, and it’s got a big AI-generated American flag on it.
As for this means for you? Well, I know you like video games. I write about them, and am by no means giving financial advice here. But even so, I’d maybe hold off on buying any cosmetics or battle passes for a little bit, maybe set some more money aside. If there’s a free-to-play game you’ve been dying to try out, now’s probably a good time!