Prime Minister Yasuhiro Nakasone replaced most of his 21-member Cabinet this evening in a routine year-end reshuffle but retained its most important personalities.

There were few surprises in his selections and no shifts in policy are expected. Reshuffles are part of a political system that rewards as many members of the ruling Liberal Democratic Party as possible with brief terms on the Cabinet.

The Cabinet's two most prominent members, Finance Minister Noboru Takeshita and Foreign Minister Shintaro Abe, were retained. The party's executive council chairman, Kiichi Miyazawa, also kept his post as Nakasone left the party hierarchy unchanged.

The three men are all viewed as potential future prime ministers.

The most significant change was the appointment of Masaharu Gotoda as chief Cabinet secretary. He held the post in a previous Nakasone Cabinet and will act as spokesman for the prime minister and chief of domestic policy.

Speaking to reporters afterward, he said: "Continuity and stability, plus promotion of important reform, were key factors in the selection of members." The main pending reform programs of the Nakasone government cover the state railway system, education and administration.

The new chief of the powerful Ministry of International Trade and Industry is Michio Watanabe, a former minister of finance who is credited with putting a human face on that ministry during his tenure.

At the Defense Agency, Nakasone kept Koichi Kato in the top post. Kato later said that Nakasone had told him continuity was needed to maintain credibility in military relations with the United States.

The old Cabinet resigned en masse this afternoon after adopting a draft national budget for the fiscal year that begins April 1.

Its formation followed lengthy negotiations between the five major factions of the ruling party. The basic distribution of Cabinet seats among them was preserved, with the largest number, six, going to the faction of former prime minister Kakuei Tanaka.

By the rules of politics here, Nakasone should step down late next year, as prime ministers are supposed to be limited to four years. But Nakasone is widely believed to be eyeing an extension, through amendment of party rules or some other device.

Elections for the upper house of the Diet, or parliament, are scheduled for next summer. Political observers are waiting to see if Nakasone will call lower house elections at the same time