Bank of Japan Deputy Warns AI Has Both Positive and Negative Economic Effects

Bank of Japan Deputy Governor Uchida Shinichi says AI adoption could boost productivity and stock prices but also pressure inflation and long-term interest rates. He notes AI is now a key topic in monetary policy discussions.

Bank of Japan Deputy Governor Uchida Shinichi has warned that the global adoption of artificial intelligence could have both positive and negative effects on productivity and the labour market, according to a speech manuscript on AI's impact on monetary policy released on 5 October.

Uchida said AI represents a major positive demand shock for the economy, putting upward pressure on prices. However, he added that it could also positively affect the supply side by raising productivity and increasing the accumulation of capital stock.

He noted that AI has become a key topic in monetary policy discussions at the Bank of Japan and other central banks worldwide. The technology affects core parameters for monetary policy, including the output gap, financial conditions and other key variables, he said.

Uchida also said AI could push up stock prices, creating a looser financial environment, while a large volume of bond issuance by AI-related companies could exert upward pressure on long-term interest rates. He said the central bank would continue to carefully examine economic and financial indicators and fully understand the impact of AI adoption.