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By Leika Kihara
TOKYO, Jan 4 (Reuters) - Bank of Japan Governor Masaaki Shirakawa said on Sunday that a rising yen would have a big negative impact on Japan short term, but he gave few clues on how he might mitigate the worsening effects of the global credit crunch.
Shirakawa said he had no preset idea about future monetary policy but, with Japanese rates already near zero, his focus was on easing financial conditions for Japanese firms.
"We see the impact of yen rises as being quite big short term," Shirakawa told national broadcaster NHK.
"We hope to always consider how best to deal with it, including through monetary policy."
But the governor added a strong currency had some positive effects in the long term, such as increasing purchasing power.
Shirakawa said he was concerned with pushing down companies' longer-term funding costs and easing their worries about financial conditions, and added he would take into account past experience from zero rates and five years of quantitative easing in Japan when considering policy.
Two-thirds of market players polled by Reuters expect the bank to return by March to some form of quantitative easing, a system of flooding the financial system with excess cash to promote lending.
To revive the economy after the burst of the "bubble" economy in the 1990s, the central bank adopted zero-interest rates and then adopted quantitative easing from 2001 to 2006.
The dollar sank to just over 87 yen last month, its lowest in more than 13 years, as the financial crisis prompted investors to flee risk.
It has since recovered to 92 yen, but the Japanese currency's ongoing strength, combined with plunging demand for manufactured exports, has deepened Japan's recession.
The Bank of Japan cut its overnight call rate target to 0.1 percent from 0.3 percent in December and decided to buy commercial paper outright to try to stem the credit crunch. (Editing by Rodney Joyce)