BOJ’s Uchida Says AI May Affect Key Monetary Policy Parameters

Bank of Japan Deputy Gov. Shinichi Uchida said AI adoption may affect both demand and supply, with implications for prices, productivity and parameters relevant to monetary policy.

Uchida described AI as a major positive demand shock that can put upward pressure on economic activity and prices. On the supply side, the technology may raise productivity and support capital accumulation.

The effects on demand appear to be showing up first, contributing to more accommodative financial conditions. Uchida also cautioned that a correction could follow if corporate profits do not keep pace with the effects of adoption.

AI may also affect several parameters relevant to monetary policy, including the output gap, financial conditions and “star variables,” which represent long-term economic equilibrium.