BOJ's Kuroda: prices are improving, consumer spending is recovering

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TOKYO Bank of Japan Governor Haruhiko Kuroda said on Friday that consumer prices are rising more than 1 percent excluding fresh food and energy, which shows that the overall inflation trend is improving.

Kuroda also said domestic demand will strengthen as the companies and households use their income to increase spending, saying that consumer spending is recovering from a lull earlier this year.

Kuroda's optimism about the economy suggests he does not see the need to ease monetary policy, though some economists have said the BOJ will change its stance and expand its quantitative easing when it updates its economic forecasts later this month.

"The overall price trend is improving, and consumer prices are expected to accelerate toward our 2 percent inflation target," Kuroda said, according to the text of his speech at the Savings and Loan Association.

"Positive momentum in the corporate and household sectors shows that domestic demand is on track to strengthen."

Kuroda acknowledged that exports and factory output have weakened due to a slowdown in emerging markets.

However, upbeat capital expenditure plans at major firms show economic growth will remain on track, he said.

Economic data show consumer spending in July-September will rise from the previous quarter, which is another sign that domestic demand is improving, he said.

Kuroda and the eight other members of the BOJ's policy board will update their gross domestic product and consume price forecasts at a meeting on Oct. 30.

The median of these estimates is likely to be below the central bank's previous forecasts, which could lead the BOJ to expand its government debt purchases to prevent inflation expectations from slipping, economists say.

(Reporting by Stanley White; Editing by Chris Gallagher & Kim Coghill)