Bank of Japan board member bullish on economic outlook

Bank of Japan board member Ryuzo Miyao said gains in consumer spending were being driven by improving underlying demand which in turn should increase upward pressure on prices.

"High stock prices are not the only reason that consumer spending is recovering," Miyao told business leaders. "A mechanism is in place that is stimulating underlying demand. This is boosting corporate earnings and leading to improvements in labour and wages."

Miyao said Japan's economy could continue to grow above its potential rate after the temporary shock from a sales tax rise on April 1, echoing equally bullish comments that BOJ governor Haruhiko Kuroda made earlier this week, which could cause some economists to scale down their expectations that the central bank will ease policy further.

The economy and consumer prices are moving broadly in line with the BOJ's forecasts, Miyao said, which would support Kuroda's argument that additional easing was not needed now.

Miyao expressed concerns about downside risks to the economy last year, but in the speech he said risks were roughly balanced, suggesting he has turned more optimistic.

The BOJ voted unanimously on Tuesday to maintain its pledge of increasing base money, its key policy gauge, at an annual pace of 60 trillion yen (HK$4.57 trillion) to 70 trillion yen.