BOJ Deputy Governor Uchida Highlights AI’s Inflationary Impact and Monetary Policy Implications

• BOJ Deputy Governor Uchida highlights AI as an inflationary demand shock.
• AI impacts long-term interest rates and monetary policy parameters.
• Remarks support yen and maintain BOJ hike expectations.

Bank of Japan (BOJ) Deputy Governor Shinichi Uchida stated that Artificial Intelligence (AI) is emerging as a significant inflationary demand shock, contributing to upward pressure on prices and long-term interest rates. He noted that AI has become a central focus for central banks, including the BOJ, as it influences key monetary policy parameters such as the output gap, financial conditions, and the neutral rate of interest. Uchida’s remarks suggested that the BOJ’s tightening efforts still have scope, which marginally supported the yen and maintained expectations for future rate hikes. He also pointed to AI-related bond supply as a factor pushing up global bond yields, including Japanese Government Bonds (JGBs). Furthermore, Uchida cautioned about potential correction risks in equity markets if AI-driven profit expectations are not met, indicating the central bank’s monitoring of asset valuations.