Bank of Japan sees AI export boom cushioning economy from oil price shock

[TOKYO] The Bank of Japan (BOJ) is increasingly highlighting the economic benefits of the global artificial intelligence boom, viewing strong demand for AI-related products as a buffer against the drag from higher energy prices linked to the Middle East conflict.

Officials signalled the shift in thinking at last week’s policy meeting, with one member touting the AI effect, according to a summary of opinions released on Wednesday (Jun 24).

“With overseas economies experiencing an upswing driven by the demand shock from the global expansion of AI-related demand, the deterioration in the terms of trade reflecting higher crude oil prices has been mitigated, and concerns over an economic slowdown have subsided,” the board member said.

Japan, like many developed nations, is getting an unexpected boost that puts pressure on policymakers to tighten policy. The same is true in the US, where surging AI investment – on data centres, chips, power infrastructure and software – has opened the door to a potential pivot.

South Korea, after months of surging exports and upward revisions to growth, is also nudging towards rate increases.

Japan is not a leading producer of advanced AI chips, but its companies play a key role in global semiconductor supply chains, particularly in manufacturing equipment and materials.

The impact is increasingly visible in trade figures. Japan’s export price index rose 11.7 per cent in May from a year earlier, the largest increase since April 1979, according to BOJ data. Export prices for electrical and electronic products jumped 23.9 per cent, the biggest gain since comparable records began in 1976.

Deputy governor Ryozo Himino made remarks last week underscoring the shift in sentiment as optimism over AI demand outweighs concerns about rising import costs.

“At our April monetary policy meeting, we noted that higher crude oil prices would raise import prices, worsen Japan’s terms of trade and exert downward pressure on the economy,” Himino said in parliament on Jun 19.

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“More recently, however, the most notable development has been the sharp rise in export prices,” Himino said. “Driven by the AI boom, exports of semiconductor manufacturing equipment and other AI-related products have increased not only in volume but also significantly in price. In a sense, this appears to be offsetting the negative impact of higher oil prices.”

The AI-driven export strength has also supported investor sentiment.

Japan’s benchmark Nikkei 225 stock index climbed to a record high this week as markets increasingly viewed the country as a beneficiary of the global surge in AI-related spending.

The BOJ raised its interest rate to the highest since 1995 last week by citing a reduced risk for a significant economic downturn. The bank also cited the global AI-related demand as one of the primary risk factors that is “necessary to pay attention to”.

A day after last week’s hike, a Bloomberg survey of economists showed that some 90 per cent expect another rate increase by year-end, with a third expecting the move in October.

“Global AI-related demand is pushing up economic activity and prices more than expected,” one board member said, according to the summary. BLOOMBERG