BoJ Deputy Warns of AI's Dual Economic Impact

Bank of Japan Deputy Governor Shinichi Uchida has highlighted the dual nature of artificial intelligence's impact on the economy, emphasizing both its benefits and risks. Speaking at the ECONDAT 2026 Fall Meeting in Tokyo on October 5, 2026, Uchida noted that AI is currently acting as a positive demand shock, boosting economic activity and easing financial conditions through rising stock prices. However, he cautioned that this optimism could be tempered by potential stagnation in corporate profits.

Uchida described AI as a general-purpose technology with the potential to significantly enhance productivity and reshape labor markets, supply, and demand. Despite these positive aspects, he pointed to a rise in AI-related corporate bond issuance, which has contributed to upward pressure on long-term interest rates. This development underscores the need for careful monitoring by the central bank.

The BoJ deputy governor also addressed the challenges of measuring AI's impact on two critical economic concepts: the neutral interest rate (r*) and the natural unemployment rate (u*). He stressed the importance of balanced approaches to accurately gauge these effects amidst other uncertainties, such as geopolitical developments and climate change. AI's implications are a regular topic in BoJ policy meetings, reflecting its broader economic significance beyond just tech-related sectors.

Uchida's comments align with earlier statements from BoJ Governor Kazuo Ueda and collaborative efforts between the BoJ and Japan's Financial Services Agency. These institutions have been working to address risks associated with generative AI, including cybersecurity concerns, through new guidelines. Surveys indicate that while generative AI adoption is expanding among Japanese financial institutions, it remains in a developing stage.