Opposition leaders called on Abe to take responsibility.
"The resignation does not make all well. Prime Minister Abe must also take responsibility... There must be a full investigation," said Yukio Hatoyama, the leader of the Democratic Party of Japan, the country's largest opposition party.
Japanese media said that Sata's political support group reported the expenses from 1990 to 2000. If found guilty, Sata could face criminal charges.
On Thursday, Masaaki Honma, Abe's handpicked point man on tax reform, resigned as head of the Council on Economic and Fiscal Policy after reports that he was living with a mistress in a luxury apartment subsidised by taxpayer money.
Abe's approval rating is hovering around 40 per cent just three months after taking office.
His decision to readmit lawmakers to the ruling party who were ousted by his predecessor, Junichiro Koizumi, for opposing a reform agenda is also thought to have contributed to his sagging popularity.