Milestone 3
Courtney Franklin
Business and Leadership
Regent University
Dr. Jeff Bajah
ECON 230 Macroeconomics
October 4, 2022
Introduction
The Bank of Japan has been struggling against inflation that has currently been spreading across the world but has seemed to not have effected Sony by much. The inflation that is taking place has brought the value of the yen down. The rising world prices has also affected the pricing of some of Sony’s products. However, Sony has still been lucrative during these difficult times, especially during the pandemic. The Bank of Japan has called for a reform on its policies pertaining to the value of the yen but, there is yet to see any improvements.
Central Bank and How It Affects Sony’s Economic Growth
The central bank has several abilities to keep the economy growing. The central bank can print money, set interest rates, set bank reserve requirements, regulates circulation, and conduct open market operations (Bajpai, updated 2022). When it comes to printing money the central bank usually does this in order to regulate inflation. It is their last option to ever have to print money (Bajpai, updated 2022). The reason for printing is to boost economic spending. In times of recession people are less likely to spend and save money, leaving businesses struggling for income. (Cowen & Tabarrok, 2020). Therefore, the central bank steps in to provide the economy with more money. For individuals and companies, securing funds to pay mortgages or start a business is easier (Bajpai, updated 2022). However, this can affect GDP, growth, interest rates, and unemployment (Bajpai, updated 2022). In order to prevent printing, the central bank has other means up its sleeve. By having commercial banks reserve money, a security blanket is created to protect the economy (Bajpai, updated 2022). If the central bank wants more money in the economy, it will lower the reserve percentage, if the bank wants less money, it will raise the reserve percentage. Lastly, the central bank can buy up bonds from commercial banks for more funds, it can also sell the bonds if there is too much money circulating in the economy (Bajpai, updated 2022).
Japan’s central bank, Bank of Japan, has been faced with an economic slowdown (Suzuki, 2021). This can weigh heavily on import and export costs (Rouz, 2019). Bank of Japan has tried to maintain their short-term interest rate at 0.1% and their bonds yield 0% to keep loan costs low (Suzuki,2021). Despite the economic slowdown, Bank of Japan still had an expectation the economic growth would rise from 2.7% to 2.9% as of 2021 (Suzuki, 2021). Experts worry after many years of the Bank’s low borrowing costs and buying bonds in bulk that were not enough to sustain funds, commercial banks’ profitability may have been compromised (Rouz, 2019).
For Sony, this could be a bad thing. The economic slowdown is putting a strain on imports and exports, which Sony, along with most of any economies market, relies on. The low loan costs and insufficient bonds also make it difficult for Sony to take out a loan should they need it. The global economic climate is no help either, Sony will have to raise prices on its products in order to gain a profit. Due to the inflation occurring in different parts of the world Sony has already had to raise its prices on the PS5 systems (Scullion, 2022). Sony has also had to deal with declining employment which also affects their profit (Laricchia, 2022).
Total number of employees in the Sony Group from fiscal year 2007 to 2022
The Fiscal Policy and the Affect on the Entertainment and Game Market
The fiscal policy is a policy used by the central banks that raise or lower revenue and spending that are influential to inflation, employment, and money flow (Kuligowski, updated 2022). Depending in which direction the money flows prices and employment can rise and fall. Through the fiscal policy the central bank can send funding to different markets that need financing, by providing these funds companies can start up and hire workers. Currently, Bank of Japan is facing a serious issue. The inflation of the US dollar has caused the value of the yen to decline (Associated Press, 2022). After many years of maintaining the same fiscal policies for many years, Bank of Japan has finally stepped forward to reform their policy, if only temporary (Associated Press, 2022). For Japan, this created benefits for individuals and companies but, also, challenges. Japan has a competitive advantage of pricing overseas, yet, on its home shores prices for food, oil, and gas are going up (Associated Press, 2022).
For Japan this can mean trouble for a couple of key markets. The rising prices in these critical goods will cause Sony’s products to also rise in prices. Sony’s entertainment market could take a hit from rising gas prices and rising food prices for production of their films. Rising prices for oil can impact the electronic gaming market for imported and exported parts and other materials. Although these issues cannot be avoided, it would seem Sony is doing not too shabby for their key markets, especially the gaming market.
The sales and income in the games segment of Sony’s company is higher across the board (Sony, 2022).
Conclusion
Bank of Japan has continued to keep its fiscal policy the same for many years, however, recent events of inflation have caused a change of policy. Bank of Japan’s fiscal policies have barely kept them in the economic game but, unlike other countries, Japan has continued on its steady climb to a stable percentage. These policies may have affected Sony in negative ways, such as the declining employment rate of Sony. This setback has not deterred Sony’s economic growth.
Resources
Associated press. (2022, 22, Sept.). Japan central bank acts to stem yen's decline against dollar. Yahoo
News. https://news.yahoo.com/japan-central-bank-acts-stem-094004379.html
Bajpai, P. (updated 2022, 28 Mar.). How Central Banks Control the Supply of Money. Investopedia.
https://www.investopedia.com/articles/investing/053115/how-central-banks-control-supply-money.asp
Cowen, T., Tabbarok, A. (2020). Modern Principles of Economics. Worth Pub.
Kuligowski, K. (Updated 2022, Aug 22). What Is Fiscal Policy?. Business News Daily.
https://www.businessnewsdaily.com/3484-fiscal-policy.html
Laricchia, F. (2022). Total number of employees in the Sony Group from fiscal year 2007
Statista.https://www.statista.com/topics/1917/sony/#dossierKeyfigures
Rouz, K.(2019, 16, Mar.) Bank of Japan Cuts Outlook on Global
Economic Growth, Keeps Stimulus Intact. Sputnik News. https://sputniknews.com/20190316/japan-gloval-economic-growth-1073302790.html
Sony. (2022). Corporate Report 2022.
https://www.sony.com/en/SonyInfo/IR/library/corporatereport/CorporateReport2022_E.pdf
Suzuki, N. (2021, 28 Oct.). Bank of Japan cuts economic growth, price forecasts, keeps easing
policy. Kyodo News. https://english.kyodonews.net/news/2021/10/14ba3dbba9f2-update2-boj-cuts-economic-growth-price-forecasts-keeps-easing-policy.html