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      Bank of Japan Deputy Governor Highlights AI's Impact on Economy and Financial Markets

      Bank of Japan (BOJ) Deputy Governor Uchida has characterized artificial intelligence (AI) as a significant positive demand shock that is exerting upward pressure on both economic activity and prices. Speaking at a recent event, Uchida noted that AI has eased financial conditions, which could pose a risk of correction if corporate profits do not keep pace with the surge in investment. He emphasized that AI has become a central topic in BOJ policy discussions, influencing key parameters such as the output gap and the neutral interest rate.

      Uchida explained that the initial effects of AI have been felt on the demand side, contributing to a more accommodative financial environment. However, he cautioned that the heavy issuance of bonds by AI-related companies has led to an increase in long-term interest rates, creating opposing forces in the financial markets. While AI has bolstered stock prices, which has further loosened financial conditions, the risk remains that a lack of corresponding profit growth could lead to a market correction.

      The Deputy Governor also highlighted the dual potential of AI to enhance productivity and capital stock in the long term, while acknowledging that its impact on labor markets could be mixed. He reiterated the BOJ's commitment to closely monitor economic and financial data to better understand the implications of AI on the economy. Although Uchida did not provide specific guidance on interest rate policy, his remarks suggest a cautious approach as the central bank navigates the evolving landscape influenced by AI.

      © 2026 KLEA News. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

      Source: KLEA News

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