Well... not actually "instant", but he could have though of 'faster' transactions.
When someone of his skills and imagination is on his path to create a decentralized digital currency, how is the transaction times are not given the most important thought process? I'm sure it isn't hard to imagine instant transactions in today's worls when email is the medium of daily communication which delivers messages in matter of seconds?
As the posters above already said, transactions are pretty much instantaneous but confirmations take 10 minutes each on average. Here's a post by Satoshi where he discusses the feasibility of a shorter block generation times (and thus shorter confirmation times):
I thought about that but there wasn't a practical way to do smaller increments. The frequency of block generation is balanced between confirming transactions as fast as possible and the latency of the network.
The algorithm aims for an average of 6 blocks per hour. If it was 5 bc and 60 per hour, there would be 10 times as many blocks and the initial block download would take 10 times as long. It wouldn't work anyway because that would be only 1 minute average between blocks, too close to the broadcast latency when the network gets larger.
Confirmations can be made faster by increasing the rate at which new blocks are found. Problem is, if new blocks are being generated too quickly then you start to see problems with the blockchain temporarily splitting due to network propagation delays. According to one figure from 2013, the mean time for a node to see a new block in the network was 12.6 seconds. If two miners oblivious to each other happened to mine blocks simultaneously, one of these blocks will fail to become part of the main chain. This is called an orphan block. The faster the blocks are generated, the more orphan blocks you will get.
Satoshi probably thought 10 minutes was a reasonable trade-off. Seeing as though Litecoin doesn't have any major issues with orphan blocks and orphan chains despite having 2.5 minute blocks vs. Bitcoin's 10 minutes, perhaps his choice was a bit on the conservative side.