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Japan PM says next BOJ head should carry on Kuroda's policy stance

By Leika Kihara

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe said the next central bank governor should be someone who would carry on the policy stance taken by incumbent Haruhiko Kuroda, signaling its ultra-easy monetary policy could be sustained for years to come.

Kuroda, a former top currency diplomat hand-picked by Abe to spread-head the Bank of Japan's efforts to end deflation, will see his five-year term expire in April next year.

"The BOJ adopted unprecedented monetary easing under Governor Kuroda, which has exerted intended effects on prices," Abe told parliament on Monday.

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"Governor Kuroda has my full trust. I hope the next governor would be someone who takes over his policy stance," he said, while adding it was too early to debate specifics on the choice.

Abe's remarks, rare to come so early before the selection process kicks off in full, leaves open the chance Kuroda could be reappointed for a second term, some analysts say.

"If you take (Abe's) words literally, then there is a possibility for Kuroda to continue his role," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"It's probably toward the end-year or at the beginning of next year that the next governor will be decided. It's still far ahead, so you can say (Abe's comments) are rare."

No governor has been reappointed for a second term since the current BOJ law, which granted the bank independence from government meddling on monetary policy, took effect in 1998.

But Abe could choose to reappoint Kuroda given his solid handling of monetary policy, say some government officials with knowledge of the decision-making process.

"There are very few people who can fill Kuroda's shoes or are even willing to do so," said one official who spoke on condition of anonymity due to the sensitivity of the nature.

Others say a career central banker who worked closely with Kuroda, such as deputy governor Hiroshi Nakaso or senior executive Masayoshi Amamiya, may get the job, or someone outside Japan's bureaucrat circles.

Some analysts say the task of BOJ governor, which includes frequent grillings in parliament and overseas travels, could be too demanding for Kuroda, who is already 72.

Under Kuroda, the BOJ adopted a massive asset-buying program in 2013 as part of Abe's "Abenomics" reflationary policy aimed at pulling Japan's economy out of stagnation.

But more than three years of heavy money printing has failed to accelerate inflation to its 2 percent target, and the bank was forced to revamp its policy framework in September to one better suited for a long-term battle against deflation.

With its huge bond buying seen nearing its limits, whoever becomes next BOJ governor faces the huge challenge of battling subdued inflation with a dwindling policy tool-kit.

The BOJ will see a huge change in the composition of its nine-member board. Two board members critical of Kuroda's radical policies will retire in July, while the terms of his two deputy governors will expire in March next year.

(Additional reporting by Minami Funakoshi; Editing by Chris Gallagher and Kim Coghill)