BoJ's Uchida: AI has acted first as a demand shock and eased financial conditions on balance

Victoria Shinder05 October 2026, 07:242 min read

Bank of Japan Deputy Governor Shinichi Uchida described artificial intelligence as a "big positive demand shock" for monetary policy in opening remarks at the ECONDAT 2026 Fall Meeting on 5 October, a conference on AI, big data and monetary policy. They are one board member's opening remarks, not a statement of policy.

Four channels to policy. Uchida said AI affects core parameters of monetary policymaking, including the output gap, financial conditions and the so-called star variables, through four routes:

• it is a big positive demand shock, which has put upward pressure on the economy and prices;
• it could affect the supply side, perhaps positively, by raising productivity and capital accumulation, which might in turn affect the neutral interest rate, r*;
• it has boosted stock prices, easing financial conditions, while large bond issuance by AI-related companies has pushed up long-term interest rates, tightening them;
• it may change labour markets structurally. Each, he said, affects policy in different directions and over different horizons, and central banks do not yet know by how much or over what time.

His tentative reading. It appears, Uchida said, that the demand side has come first and has made financial conditions more accommodative on balance, while there is a risk of correction if profits do not follow. The effects on r* and on the natural rate of unemployment, u*, are hard to gauge at this point. He added that AI has become a key topic at the Bank's Monetary Policy Meetings and that the Bank assesses the economy as a whole, including sectors less affected by AI.

AI in the Bank's own work. On analysis, he said AI and big data are removing two constraints, computing power and data availability. Recent examples he gave include mobility data used during the pandemic and vessel-tracking data now used to monitor the effect of the Middle East conflict on Japan's crude oil imports and supply chains.

What it means

The remarks put AI inside the framework the Bank of Japan uses to set rates rather than treating it as a long-run productivity story. Saying the demand effect came first and eased conditions on balance is a cautious description, not a policy signal; the next indication of how much weight the board gives it will come from the Bank's outlook report and meeting materials.