Bank of Japan Warns AI Boom May Trigger Correction
Deputy Governor Shinichi Uchida says the AI boom is a positive demand shock that could lead to a market correction if profits fail to materialize.
Bank of Japan Deputy Governor Shinichi Uchida stated that the global artificial intelligence boom is acting as a "big positive demand shock" that has increased economic activity and put upward pressure on prices. Speaking at the ECONDAT 2026 Fall Meeting on October 5, Uchida noted that AI adoption has eased financial conditions by boosting asset prices, though he observed that heavy bond issuance by AI-related firms has simultaneously pushed long-term interest rates higher.
Uchida assessed that the demand side of AI has arrived before its long-term productivity and supply-side benefits have fully materialized. While this has made financial conditions more accommodative on balance, he warned that a market correction remains a risk if corporate profits do not eventually justify current investment expectations.
The Bank of Japan is monitoring whether robust AI demand will drive underlying inflation above its 2% target, which could necessitate further monetary tightening. This follows interest rate hikes in June and September that were triggered by a weak yen and energy shocks linked to the closure of the Strait of Hormuz and the Iran war. Uchida emphasized that policymakers must evaluate AI as part of the broader economy rather than as a standalone driver for immediate policy action.
