October 5, 2026, (Inside AI) — The Bank of Japan's Deputy Governor Shinichi Uchida said on Monday that the global artificial intelligence boom may have loosened financial conditions by driving demand and lifting asset prices, but he cautioned that a market correction could follow if expected profits fail to appear.
Speaking in a speech posted on the central bank's website, Uchida framed AI adoption as a major economic force with an uncertain endpoint. The comments carry weight because Japan's monetary policy has already tightened twice this year, in June and September, as energy costs tied to the Iran war and a weak yen pushed inflation higher.
Uchida described AI spending as a demand shock that has supported both economic activity and prices. "It is a big positive demand shock, which has put upward pressure on the economy and prices," he said.
That demand has flowed into financial markets. AI-related firms have raised large amounts of debt, and that bond issuance has pushed long-term interest rates upward even as equity prices have climbed. Uchida said the net effect so far has been easier financial conditions.
"Tentatively, it appears the demand side has come first and made financial conditions more accommodative on balance," he said. "But there is a risk of correction if profits do not follow."
The warning lands at a moment when AI capital spending is running at historic levels. Data center construction, advanced chip fabrication, and power infrastructure have absorbed hundreds of billions of dollars globally. Much of that spending is financed through debt, which links the technology cycle directly to credit markets.
Uchida also pointed to longer-term effects that economists are still debating. AI could raise productivity and accelerate capital accumulation, which in turn might shift a country's natural rate of interest, the theoretical rate that neither stimulates nor restrains an economy. He said the overall impact on Japan's natural rate remains difficult to measure.
The Bank of Japan has listed strong AI-related demand as one factor that could push underlying inflation above its 2% target, which would justify further monetary tightening. Japan imports almost all of its crude oil, and most of that supply came from the Middle East before the closure of the Strait of Hormuz, making the country especially sensitive to energy-driven price pressure.
Uchida said the central bank will keep examining economic and financial data to build what he called a "consistent picture" of AI's effects. That phrasing suggests the BOJ is not yet ready to treat the AI boom as a settled input in its policy models.
The caution is notable given how central AI has become to global equity valuations. Semiconductor firms, cloud providers, and power companies tied to data centers have driven major index gains over the past two years. If earnings fail to match those expectations, the correction Uchida described could hit both stock and bond markets at once.
For Japan, the stakes are compounded by currency dynamics. A weak yen raises import costs and adds to inflation, while higher long-term rates from AI-related bond issuance could tighten conditions in ways the BOJ did not intend. The central bank is effectively navigating two forces pulling in opposite directions.
Uchida did not offer a timeline for when the BOJ might act again, nor did he specify what data would trigger a policy shift. His remarks instead framed AI as a variable the bank is still learning to read, with demand-side effects visible now and profit-side effects still unproven.
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Analysts have noted that AI investment cycles historically run ahead of measurable productivity gains. The gap between spending and returns is where market risk accumulates. Uchida's speech acknowledged that gap without predicting which way it will resolve.
The BOJ's next policy meeting will be watched for any change in language around AI-driven demand. For now, the central bank appears to be holding its position: monitoring, measuring, and waiting for profits to catch up with the promise.
