BOJ Deputy Governor Shinichi Uchida: AI is both a massive positive demand shock and could reshape core parameters of monetary policy

PANews reported on October 5 that Bank of Japan Deputy Governor Shinichi Uchida said artificial intelligence has become a key topic of discussion at monetary policy meetings of central banks around the world, including the BOJ. He noted that the adoption of AI has both positive and negative effects on productivity and the labor market: on the demand side, AI is a massive positive demand shock that puts upward pressure on the economy and prices; on the supply side, AI may have positive effects by boosting productivity and promoting capital stock accumulation. Initially, AI's impact on the demand side appears to be emerging first, making financial conditions more accommodative overall, but there remains a risk of correction (pullback) if corporate profits fail to keep up. He also stressed that AI will affect several core parameters of monetary policymaking, including the output gap, financial conditions, and the "star variables" that represent the economy's long-run equilibrium "natural rates."