Bank of Japan Deputy Governor Shinichi Uchida said the global artificial-intelligence boom may have made financial conditions more accommodative by lifting demand and asset prices. He described AI adoption as a substantial positive demand shock that was putting upward pressure on economic activity and prices. The technology could also raise productivity and capital accumulation, potentially affecting the natural rate of interest. Uchida nevertheless warned that markets could correct if expected profits fail to materialise.
Uchida delivered the remarks at the ECONDAT 2026 Fall Meeting in Tokyo on 5 October. The conference focuses on non-traditional data, machine learning and natural-language processing in macroeconomics. The BOJ said it was still difficult to determine AI's overall effect on Japan's natural interest rate. Reuters reported that the bank would continue examining economic and financial data for a consistent assessment.
AI AFFECTS DEMAND AND LONG-TERM RATES
AI investment can loosen financial conditions when stronger demand and higher equity valuations support spending and risk-taking. Uchida said large bond issuance by AI-related companies had worked in the opposite direction by putting upward pressure on long-term interest rates. The balance between those channels will influence how policymakers interpret financial conditions.
The supply-side effect is also uncertain. Productivity gains could increase the economy's sustainable capacity and alter the neutral interest rate, while rapid demand growth could raise inflation before those gains arrive. That timing complicates judgments about whether AI is ultimately inflationary or disinflationary.
POLICYMAKERS SEEK A CONSISTENT PICTURE
The comments did not announce a monetary-policy decision or a change in the BOJ's rate guidance. They instead identified AI as a factor that may affect asset prices, investment, inflation and the level of interest rates over time. The warning also highlighted the risk that valuations could adjust if corporate earnings fall short of expectations.
The next milestone is the BOJ's assessment of incoming activity, inflation and financial-market data ahead of future policy meetings. Policymakers will need to distinguish temporary demand effects from lasting productivity gains. Any effect on the natural rate will remain conditional on evidence from investment, profits and the broader economy.