The global AI investment boom is beginning to affect inflation, asset prices and long-term interest rates, according to Bank of Japan Deputy Gov. Shinichi Uchida, who warned that financial markets could reverse sharply if expected AI profits fail to materialize.
Uchida described worldwide AI adoption as a “big positive demand shock” that is increasing economic activity and prices. Rising technology stocks have made financial conditions easier, while large bond offerings by AI-related companies are pushing long-term borrowing costs higher, he said in remarks published today.
AI may also change labor markets structurally, freeing people from routine cognitive tasks while also replacing certain skills, he said.
“Each of these factors affects the conduct of monetary policy in different directions and in different
time horizons,” Uchida explained.
AI could raise productivity and spur capital investment, potentially affecting the natural rate of interest, Uchida said, although he said the overall impact remains difficult to determine.
Uchida did not say the central bank would change monetary policy specifically because of AI. His remarks instead identified AI investment as one of the structural forces that could alter financial conditions and the future path of interest rates.