Shinichi Uchida said worldwide AI adoption has acted as a demand shock that lifted asset prices, but warned of a market correction if expected profits do not arrive.
Bank of Japan Deputy Governor Shinichi Uchida said the global artificial-intelligence boom may have eased financial conditions by stoking demand and boosting asset prices, while warning of a pullback if expected profits fail to materialize.
In a speech text posted on the central bank's website on Monday, Uchida called worldwide AI adoption a big positive demand shock that has put upward pressure on the economy and prices. He said the technology could also raise productivity and capital stock, which might affect a country's natural rate of interest.
Tentatively, he said, the demand side has come first and made financial conditions more accommodative on balance. There is a risk of correction if profits do not follow. While AI has boosted stock prices, huge bond issuance by AI-related firms has put upward pressure on long-term interest rates, he said.
The BOJ will keep examining data to form a consistent picture of AI's impact, Uchida said, adding that the overall effect on Japan's natural rate of interest is still hard to gauge. Reuters reported that the BOJ has identified robust AI-related demand as one factor that could push underlying inflation above its 2 percent target and require further tightening.
The remarks add a technology channel to the bank's rate debate without setting a date for the next policy move.