Surprised to find it was a mechanical encoder, Alps brand. Upon disassembly, it was obvious the unit had been over lubricated and the grease, which looked and smelled like petroleum jelly, had migrated everywhere, contacts and encoder disc included.
Cleaned everything, re-tensioned one of the three contacts so they had the same profile, applied a thin film of de-oxit and reassembled. Good as new until the next time when I’ll replace it.
PS: getting the encoder out was more work than repairing it. Remove the front panel assembly then pop out the translucent window in front of the vfd with three latch points along the top of the panel, remove the encoder nut then slide the pc board off the three detents that hold the keyboard area in place. Obvious once you’ve done it, not so obvious from the outset with no help from the service manual.