Bank of Japan Deputy Governor Uchida Shinichi said that artificial intelligence is triggering a surge in demand, which in turn is driving up inflationary pressure and long-term interest rates. The impact may affect neutral interest rates. “First, this was a major positive demand shock, putting upward pressure on the economy and prices. Second, it may affect the supply side, and may have a positive impact by increasing productivity and enhancing capital stock accumulation, which in turn may affect actual neutral interest rates,” Uchida said in his speech on Monday. Shinichi Uchida pointed out that although growing demand for AI is driving up stock prices and making the financial environment more relaxed, large-scale bond issuance by technology companies has boosted long-term yields, leading to a tighter financial environment. Similarly, longer-term structural effects may move policies in a different direction. “AI may quickly make some forms of human capital obsolete, particularly those skills designed for mental labor,” said Shinichi Uchida. “It may also increase social inequalities, as people with more technical skills and flexibility may benefit more than others.” He added that these conflicting effects require careful study, and their overall impact on real neutral interest rates is still difficult to assess. “We don't have a clear answer yet,” he said.

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