This article examines how three factors—advances in generative AI, global supply chain fragmentation and immigration restrictions—may affect prices in Japan and around the world as the BOJ assesses whether 2% inflation has taken hold.
This article analyzes how the BOJ will determine whether an underlying inflation rate of 2% has taken hold, focusing on structural changes in the global economic price environment. It identifies three sources of new demand: rapid technological innovation in generative AI, global supply chain fragmentation and immigration restrictions in advanced economies.
The development of generative AI is expected to increase demand for data centers and AI infrastructure, along with electricity demand. At the same time, it is explained that innovation may stimulate demand more strongly than it restrains demand generated by that innovation. From the perspective of Jevons' paradox, the article points out that greater efficiency can stimulate rather than suppress demand, a phenomenon that is still occurring today.
It also presents the view that global supply chain fragmentation and immigration restrictions may affect prices through constraints on the supply side, raising the possibility of an era in which inflation becomes persistent rather than representing a temporary reversal.
The article notes that the stable achievement of the BOJ's 2% inflation target is directly linked to trends in costs, wages and interest rates, and that the effects of rising prices will also spread to the economic behavior of companies and individuals.