Bank of Japan Deputy Governor Shinichi Uchida said on October 5 in opening remarks at the ECONDAT 2026 Fall Meeting that AI is already influencing the variables central banks use to assess monetary policy. His central observation was that AI is initially operating as “a big positive demand shock”, putting upward pressure on economic activity and prices before its longer-term supply-side benefits have fully emerged. At the same time, AI could eventually raise productivity and capital accumulation, potentially affecting the economy’s neutral rate of interest, or r-star.
Uchida said the balance of those effects is still evolving. AI-driven gains in equity prices have eased financial conditions, while heavy bond issuance by AI-related companies has pushed long-term interest rates higher and worked in the opposite direction. His tentative assessment was that “the demand side has come first”, with AI making financial conditions “more accommodative on balance” so far. However, he also warned that this could reverse if corporate profits fail to justify current expectations.
The policy significance is therefore less about an immediate BoJ rate signal and more about the sequencing of AI’s economic effects. The near-term impulse is demand- and price-positive, while the potential productivity payoff—and its implications for r-star and labour-market structure—remains harder to quantify and likely operates over a longer horizon. Uchida stressed that the scale, timing and direction of these forces are still uncertain, leaving policymakers to judge AI as part of the economy as a whole rather than as a standalone reason for action.
Key Takeaways
- AI is already acting as a positive demand shock: BoJ Deputy Governor Shinichi Uchida said AI is putting upward pressure on both economic activity and prices.
- Demand effects are arriving before productivity gains: Uchida’s tentative assessment was that “the demand side has come first”, while the longer-term effects on productivity and potential growth remain harder to quantify.
- Financial conditions have eased on balance: AI-related equity gains have loosened conditions, although heavy bond issuance by AI-related companies has pushed long-term yields higher.
- The neutral-rate effect is still uncertain: AI could eventually raise productivity and capital accumulation and therefore affect r-star, but Uchida said the scale and timing are not yet clear.
- There is a correction risk: Uchida warned that financial conditions could tighten if profits fail to justify current expectations around AI investment.
- This was not a near-term BoJ guidance speech: Uchida discussed AI’s macroeconomic transmission rather than signalling a specific decision for the next policy meeting.
