By Daniel Leussink and Tetsushi Kajimoto

TOKYO (Reuters) -Japan’s government has sounded out Bank of Japan (BOJ) Deputy Governor Masayoshi Amamiya to succeed incumbent Haruhiko Kuroda as central bank governor, the newspaper reported early on Monday, citing anonymous government and ruling party sources.

The next BOJ chief will face the delicate task of normalising ultra-loose monetary policy, which is drawing increasing public criticism for distorting market function.

A career central banker who has drafted many of the BOJ’s monetary easing tools, Amamiya has been seen by markets as a top contender to take over as next governor.

Prime Minister Fumio Kishida’s administration is in the final stages of deciding on successors to Kuroda and two deputy governors and is in discussions with the ruling coalition about the process, the Nikkei said.

The government’s nominations will be presented to parliament later this month and take effect upon both houses granting approval, which is effectively a done deal since the ruling coalition has a solid majority.

The Nikkei report did not say whether Amamiya had accepted the offer. When asked about the Nikkei report, Finance Minister Shunichi Suzuki told reporters he had not heard that the government had offered Amamiya the job.

Jiji news agency said Amamiya had not commented to reporters when asked whether he had been sounded out about becoming BOJ governor.

In a news conference on Monday, Deputy Chief Cabinet Secretary Yoshihiko Isozaki said there was no truth to the report the government had sounded out Amamiya for the top BOJ job.

Kishida’s choice of a successor to Kuroda, whose five-year term will end on April 8, will likely affect how soon the central bank could phase out its massive stimulus. Inflation hit 4% in December, double the BOJ’s 2% target.

The dollar was last up 0.6% at 131.97 yen, following Isozaki’s comments. It rose as high as 132.60 yen after the Nikkei report, trading above the 132-level for the first time since Jan. 12, as Amamiya is seen by markets as more dovish than other contenders for the post.

If Amamiya did become governor, his appointment would frustrate investors who are long on the yen and hoping for someone more hawkish, such as former deputy governor Hirohide Yamaguchi, to get the job, said Chris Weston, head of research at Pepperstone.

“Amamiya, if (he) accepts, will have full reign on policy changes and the idea of policy continuation is true here,” he said, adding that investors whose base case was for the BOJ to tweak its yield control policy in late April would now be reviewing that call.

Amamiya played a key role in drafting Kuroda’s asset-buying programme in 2013 and has consistently called for keeping ultra-low interest rates. But he also said in July the BOJ must “always” think about the means of exiting ultra-loose monetary policy.

Amamiya and Masazumi Wakatabe are currently serving as deputy governors, but their five-year terms end on March 19.

With inflation exceeding its 2% target, markets are rife with speculation the BOJ will start raising interest rates under the successor of dovish Kuroda.

Critics of the BOJ’s ultra-loose policy warn of the rising cost of prolonged easing, such as market distortions caused by the bank’s relentless defence of its yield cap.

A task force of the opposition Constitutional Democratic Party of Japan on Friday issued a proposal calling on the BOJ to abandon its yield control policy, and target achievement of wage growth that exceeds the pace of inflation.