TOKYO, Sept 29 (Reuters) - Japan's oil refinery capacity needs to be trimmed further as local demand continues to fall by 2%-3% a year because of a shrinking population, Shunichi Kito, the new president of the Petroleum Association of Japan (PAJ) said on Thursday.

Kito was appointed earlier in the day to replace former president Tsutomu Sugimori who resigned in August for "personal reasons" after stepping down as the CEO of Eneos Holdings . Eneos said this month Sugimori had "engaged in inappropriate behavior" and the company asked him to resign. (Reporting by Yuka Obayashi; Editing by Christian Schmollinger)