Albert M. Craig, professor of Japanese History, will become director of the Harvard-Yenching Institute on January 1, 1976, the trustees of the Institute announced Friday.

Craig will replace John C. Pelzel, professor of Anthropology and curator of Far Eastern Ethnology, who has asked to be relieved after 12 years of service.

Professors in East Asian Studies yesterday characterized Craig as a fine scholar whose knowledge of Japanese history is enhanced by extensive traveling experience.

A 1949 graduate of Northwestern University, Craig came to Harvard in the early 1950s as a graduate student in History and East Asian Languages. The 46-year-old scholar earned his Ph.D. in 1959.

He teaches Social Sciences 11b, a popular undergraduate course, and a graduate seminar on modern Japanese history, both of which he says he will continue to teach after becoming director.

Edwin O. Reischauer, chairman of the Institute trustees and University Professor, said yesterday Craig is a "very, very fine scholar."

As director, Craig must co-ordinate the Institute's yearly budget of $1.2 million.