2ND LD: New BOJ deputy chief sees no need for interest rate cut.

TOKYO, Oct. 27 Kyodo

(EDS: RECASTING. ADDING INFO)

Japan's current credit conditions are already accommodative enough, new Bank of Japan Deputy Governor Hirohide Yamaguchi said Monday, indicating there is no immediate need for the central bank to cut interest rates.

The comment was apparently aimed at dismissing market speculation that the BOJ may lower lending rates within the year in order to boost the Japanese economy, which has been under pressure from the global economic slowdown amid the financial turmoil.

Yamaguchi, appointed to his post earlier in the day following Diet approval Friday, said at his first press conference as one of the bank's two deputy chiefs that the BOJ's current target rate for unsecured overnight call money -- 0.5 percent -- is ''extremely low.''

''The cost to companies of raising necessary funds is therefore at considerably low levels. I note that as a result, such an accommodative financial environment has supported corporate activities,'' Yamaguchi, a former BOJ executive director in charge of monetary policy planning, told reporters.

The BOJ would rather curb market tensions following the worldwide credit turmoil with flexible and ample liquidity injections into money markets than an interest rate reduction, he suggested.

Yamaguchi also showed his understanding of the government's request to the BOJ to restart purchasing stocks held by banks as an emergency measure to prevent deterioration in their balance sheets amid recent stock market turbulence.

''We cannot ignore the risk caused by share price volatility to financial institutions,'' he said. The BOJ ''would like to study if there is anything we can do in response.''

Yamaguchi also said recent sharp rises in the yen against the U.S. dollar have prompted the Japanese central bank to become more watchful of volatility in the currency market.

The BOJ is ''carefully'' watching the impact of developments in the foreign exchange market on Japan's economy and prices, Yamaguchi said, although refusing to comment on possible intervention.

One of the two BOJ deputy governors' seats had been vacant since April due to political wrangling.

The opposition-controlled House of Councillors had rejected several government nominees for the BOJ governor and deputy posts even as the House of Representatives, where the ruling coalition led by Prime Minister Taro Aso's Liberal Democratic Party maintains a majority, approved them.

The breakthrough came after the main opposition Democratic Party of Japan agreed to Yamaguchi's nomination last week.