Uchida flags AI demand shock and uncertain impact on r-star
Bank of Japan Deputy Governor Shinichi Uchida stated on October 5, 2026, that artificial intelligence acts as an immediate positive demand shock on prices, while its long-term effects on equilibrium interest rates remain uncertain.
From vessel tracking to demand shocks
At the ECONDAT 2026 Fall Meeting, Bank of Japan Deputy Governor Shinichi Uchida detailed how AI and big data are directly entering central bank decision-making.
The BOJ has deployed alternative datasets, utilizing real-time mobility tracking during the pandemic and vessel tracking data to monitor supply chain disruptions from Middle East tensions.
Uchida explained that AI currently influences core monetary policy parameters as a positive demand shock that exerts upward pressure on economic activity and prices.
Corporate developments present divergent financial forces: rising stock valuations ease financial conditions, whereas massive bond sales by tech firms lift long-term yields.
Cognitive labor and the neutral rate
Unlike previous general-purpose technologies that replaced physical labor, AI directly substitutes for human cognitive tasks.
Uchida highlighted that structural impacts on equilibrium rates, such as r-star and u-star, remain impossible to gauge precisely.
While AI investments make broader financial conditions accommodative, Uchida warned of asset price corrections if corporate profits fail to match expectations, urging policymakers to avoid overestimating technological shifts.
Between demand shock and tech hype
Treating AI as a tangible demand shock anchors central bank analysis in near-term reality.
Yet admitting that equilibrium star variables are unmeasurable exposes the limits of current policy models.
Policymakers must ensure speculative market valuations do not distort rate decisions.