Shinichi Uchida, the Deputy Governor of the Bank of Japan, cautioned that a correction in the stock market could occur if investments in artificial intelligence fail to yield the anticipated returns for companies. He made this statement on October 5 during his opening remarks at the ECONDAT 2026 conference.
Uchida described the surge in AI as a "significant positive shock to demand," which supports the economy and drives prices upward.
This technology boom has also led to rising stock prices, effectively easing financial conditions by making capital more accessible for companies and investors.
However, Uchida noted that the impact of AI on financial conditions is complex. Large bond issuances by companies in the sector are pushing up long-term interest rates, thereby increasing financing costs.
According to Uchida, the effects of rising demand have manifested more rapidly than improvements in productivity, tilting the balance in favor of demand.
"It can be preliminarily stated that the demand effect appeared first, and overall, it has made financial conditions more accommodative. However, there is a risk of correction if profits do not follow," he remarked.
AI as a Factor in Monetary Policy
Uchida pointed out that previously, central banks discussed AI mainly in conceptual terms regarding future monetary policy. Now, it must be considered in evaluating the current economic landscape.
He indicated that AI has become a key topic in the Bank of Japan's monetary policy meetings.
Uchida identified four channels through which AI impacts the economy, which include demand, financial conditions, supply, and the labor market.
AI has the potential to enhance productivity and accelerate capital accumulation, thus affecting the natural interest rate—the level at which monetary policy neither stimulates nor restrains the economy. However, assessing this effect is currently challenging.
Each of these channels operates in its own direction and timeframe.
"To what extent and within what timeframe? We do not have a clear answer yet," Uchida stated.
Consequently, the Bank of Japan will continue to closely monitor economic and financial indicators to form a comprehensive understanding of AI's impact.
Uchida also highlighted the implications for workers, noting that AI could relieve individuals of routine intellectual tasks and expedite innovation. However, it may also devalue certain skills and exacerbate social inequality, as those with higher technological proficiency and adaptability stand to benefit more.
AI Drives Price Increases in Japan
The Bank of Japan is already incorporating global demand for AI into its forecasts.
In its July report, the central bank identified AI demand as a contributing factor to supporting Japan’s economy. Increased demand for semiconductors and other components is also pushing prices higher.
The central bank anticipates that starting in the second half of the 2026 fiscal year, annual inflation will be significantly above 2%.
In addition to the demand for AI infrastructure, this is driven by high oil prices and a weakening yen. Subsequently, the regulator expects price growth to slow down to around 2%.
As reported by Reuters, the regulator considers sustained AI-related demand as a factor that could push core inflation above the target level, necessitating further interest rate hikes.
Central Banks Monitoring AI Boom Risks
Uchida’s warning comes amid increasing regulatory scrutiny of AI companies' valuations and the sector's debt financing.
On September 30, the Bank of England reported that the likelihood of risks materializing in the financial system, including those associated with AI and debt burdens, has risen.
The regulator noted the rapid growth of debt financing for AI infrastructure and the potential for sharp asset revaluations if investor expectations change.
It is worth noting that on September 18, the Bank of Japan raised its key interest rate to 1.25%, the highest level since 1995, amid escalating inflation risks.
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