Summary
- Speaking about the central bank’s policy outlook, Uchida said robust corporate spending and the adoption of new technologies were boosting economic activity and putting upward pressure on prices.
- “It is a big positive demand shock, which has put upward pressure on the economy and prices,” Uchida said in the text of a speech published on the central bank’s website on Monday.
- More accommodative financial conditions have been supported by rising stock prices and increased capital accumulation, while heavy corporate bond issuance has put upward pressure on long-term interest rates, Uchida said.
The global artificial intelligence (AI) boom has acted as a large-scale positive demand shock, easing financial conditions and lifting asset prices, Bank of Japan (BOJ) Deputy Governor Shinichi Uchida said.
Uchida warned that elevated asset valuations could leave financial markets vulnerable to a sharp correction if expected AI-related corporate profits fail to materialize.
Speaking about the central bank’s policy outlook, Uchida said robust corporate spending and the adoption of new technologies were boosting economic activity and putting upward pressure on prices.
“It is a big positive demand shock, which has put upward pressure on the economy and prices,” Uchida said in the text of a speech published on the central bank’s website on Monday.
He warned that financial markets could face a “snapback” if expected AI-related profits fail to materialize and current valuations prove unsustainable.
More accommodative financial conditions have been supported by rising stock prices and increased capital accumulation, while heavy corporate bond issuance has put upward pressure on long-term interest rates, Uchida said.
The BOJ said strong demand associated with advanced technologies was an important factor in its assessment of the economic outlook and monetary policy.
Uchida also noted that AI could boost productivity and raise capital accumulation, potentially affecting Japan’s natural rate of interest.
He said the BOJ was still assessing the technology’s broader economic impact and that it remained difficult to determine its overall effect on Japan’s natural rate of interest.
The central bank will continue to examine economic and financial data to establish a “consistent picture” of AI’s impact, Uchida said.
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