Bank of Japan's Uchida warns AI boom could spark market correction

BOJ deputy governor flags correction risk from AI hype

Bank of Japan Deputy Governor Shinichi Uchida said the rapid global uptake of artificial intelligence has acted as a “large positive demand shock,” boosting economic activity and pushing asset prices higher. In a speech posted on the BOJ website on Monday, he warned that if the surge in AI‑related investment does not translate into corporate profits, markets could face a correction.

AI lifts stocks, but bond issuance nudges yields up

Uchida noted that AI‑driven equity rallies have eased financial conditions, but the flood of bond issuance from AI‑focused firms has lifted long‑term interest rates. He described the situation as a “mismatch between elevated asset valuations and the profits ultimately generated by AI‑related investments,” a scenario that could prompt a pullback in equity markets.

Inflation pressure and the BOJ’s policy outlook

The central bank has already flagged AI‑driven demand as a factor that could push underlying inflation above its 2 % target, potentially prompting further monetary tightening. The BOJ raised its policy rate in June and again in September 2026, citing energy‑price shocks from the Iran‑related oil market and a weaker yen that has raised import costs.

Regional ripple effects: a widening current‑account divide

Data from a Nomura Global Markets Research report dated 28 September shows the AI boom widening the current‑account gap between Northeast Asia and Southeast Asia. A 12‑month sum to July 2026 recorded a record‑high surplus of $538 billion for the North, driven by Taiwan and South Korea’s dominance in high‑value chip exports. In contrast, Southeast Asian economies such as Thailand, the Philippines and Indonesia are seeing larger deficits, as data‑centre imports and higher oil prices weigh on their trade balances.

SoftBank’s massive AI bets add a corporate angle

While central bankers assess macro risks, Japan’s richest man Masayoshi Son is doubling down on AI. SoftBank Group completed a $30 billion investment in OpenAI in October 2026, finalising its commitment to the ChatGPT maker’s last fundraising round. To fund the deal, SoftBank sold its entire stake in Nvidia earlier in 2025, a move reported by Bloomberg and echoed by the Times of India.

What the warning means for markets and policy

Uchida said the BOJ will keep a close eye on economic and financial data to gauge AI’s overall impact, acknowledging that the technology’s productivity boost could eventually raise the “natural rate of interest.” For now, the message to investors is clear: the AI‑driven rally may be temporary if earnings don’t keep pace, and any sharp sell‑off could feed back into the BOJ’s assessment of financial conditions.

Bottom line

The AI boom is reshaping everything from chip exports in Taiwan and Korea to massive corporate bets in Japan. The BOJ’s cautionary tone suggests policymakers are preparing for a scenario where exuberant valuations meet disappointing profits, a clash that could reverberate through global markets.