By Tetsushi Kajimoto and Kentaro Sugiyama

TOKYO An outspoken leader of a Japanese business lobby said on Thursday the central bank should unwind its easing programmes to live with interest rates although it may take a year to exit monetary stimulus.

Takeshi Niinami, chairman of Keizai Doyukai, who also heads Suntory Holdings Ltd, said the Bank of Japan "must normalise" monetary policy so that it could help weed out incompetent firms and facilitate labour turnover towards growth industries.

"The BOJ must make a move," said Niinami, who also serves as a private-sector member of a top government economic advisory panel.

"There must be quite a lot of political reservation about completely abandoning them," Niinami said. "That's why the BOJ may be thinking it would be better off falling behind the curve."

Many private-sector economists speculate that the BOJ may phase out crisis-mode stimulus if regular wage talks due early next year result in wages going up higher than rising prices.

Last month, under yield curve control (YCC), the BOJ left its target for short-term interest rates at -0.1% and that for the 10-year government bond yield at around 0% set. But it re-defined 1% on the 10-year yield as a loose "upper bound".

"That should be taken as a message that the BOJ is leaving the YCC behind gradually," Niinami said. "If it's unwound all at once that would cause ripple effects though.".

The BOJ must urge firms to prepare for living in an economy with interest rates, he said.

Niinami, who is also a former chairman of convenience store chain Lawson Inc, said in January that he expected the BOJ to show a clear policy roadmap, including criteria for ending its practice of controlling long- and short-term yields.

(Reporting by Tetsushi Kajimoto; editing by Robert Birsel)