BOJ Sees AI Export Boom Cushioning Economy From Oil Price Shock
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Author of the article:You can save this article by registering for freehere. Orsign-inif you have an account. 90durqnludq(nu(uybv}104d_media_dl_1. pngBOJ, Bloomberg(Bloomberg) — The Bank of Japan 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. Subscribe now to read the latest news in your city and across Canada. Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others. Daily content from Financial Times, the world's leading global business publication. Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account. National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on. Daily puzzles, including the New York Times Crossword. 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Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountorOfficials signaled the shift in thinking at last week’s policy meeting, with one member touting the AI effect, according to a summary of opinions released Wednesday. “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. Get the latest headlines, breaking news and columns. By signing up you consent to receive the above newsletter from Postmedia Network Inc. A welcome email is on its way. If you don't see it, please check your junk folder. The next issue of Top Stories will soon be in your inbox. We encountered an issue signing you up. Please try againJapan, 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 centers, 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 toward rate increases. Japan isn’t 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% 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%, 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 June 19. “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 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% 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. Join the ConversationThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more aboutcookies here. By continuing to use our site, you agree to ourTerms of UseandPrivacy Policy.