Bank of Japan forecasts growth driven by AI amid yen support efforts

The Bank of Japan anticipates a period of mild but persistent economic growth, driven largely by international demand for artificial intelligence, including semiconductors and data centers. While geopolitical tensions in the Middle East and energy price volatility pose risks, the central bank expects these to be cyclical. Government measures supporting wages and investments are expected to mitigate global slowdowns, with a potential strengthening of the growth trajectory from 2027 onward.

Simultaneously, recent efforts by the United States and Japan to support the yen have sparked discussions regarding the global status of the US dollar. Analysts at Goldman Sachs remain skeptical that such interventions undermine the dollar's dominance as a reserve currency. They note that Japan's access to the Federal Reserve's FIMA Repo Facility allows foreign central banks to obtain dollar liquidity without selling Treasury bonds, a mechanism that reinforces the dollar's utility and deep capital markets during periods of pressure.