Sanaichi Uchida: AI is a positive demand shock that will reshape the core parameters of monetary policy

Vice Governor of the Bank of Japan, Maki Uchida, stated that artificial intelligence has become a key topic in monetary policy meetings of central banks around the world. AI, as a huge positive demand shock, brings upward pressure to the economy and prices, while also playing a positive role on the supply side by improving productivity and accumulating capital stock. The impact of AI on the demand side is first evident, leading to an overall easing of the financial environment. However, if corporate profits fail to keep up, there is a risk of a pullback. AI will affect core monetary policy parameters such as output gaps, financial conditions, and natural rates.