UPDATE 2-BOJ's Fukui says Japan economic growth slowing

(Adds comments from BOJ's Osaka branch manager, more background)

By Leika Kihara and Hideyuki Sano

TOKYO, Jan 15 (Reuters) - Bank of Japan Governor Toshihiko Fukui reiterated on Tuesday Japan's economic growth is expected to slow for some time, adding to uncertainty over whether the bank will cut or raise interest rates.

Fukui's cautious view came as Japanese stock prices fell to a 26-month low on concern the yen's rise against the dollar could hurt exporters' earnings. [.T]

"Rising raw material costs are making companies somewhat more cautious about business conditions," Fukui said in a speech to a meeting of the BOJ's regional branch managers.

"Economic growth is expected to slow for some time, although after that the economy will continue to gradually expand," he said.

Fukui also said uncertainty over global economic conditions, such as surging commodity prices and downside risks to U.S. growth, warrants close monitoring in guiding monetary policy.

The BOJ has long said it will raise rates gradually, as its current policy rate of 0.5 percent is so low it could lead to the economy's overheating in the long term.

But jittery global markets, worries of a recession in the United States and signs of softness in Japan's economy since mid-2007 have cautioned the BOJ, which last raised rates to 0.50 percent from 0.25 percent in February.