|Foreign minister Seiji Maehara announced his resignation after admitting guilt in a funding scandal [AFP]
Naoto Kan, Japan’s prime minister, has shrugged off calls for his resignation and said he plans to continue until the next lower house election, which must be held by late 2013.
"Carrying out the administration's duties for a four-year term and then letting the people decide at the ballot box is best for the people themselves," Kan told a parliamentary session on Monday.
"I intend to firmly fulfil my duty until that time comes," Kan said.
The resignation of Seiji Maehara, the foreign minister who was a strong contender to succeed Kan, has deepened the impression of a government in disarray. But analysts said it was unlikely to affect financial markets immediately.
The stalemate is blocking passage of budget bills to implement a $1 trillion budget for the year from April and keeping the government from tackling tax reforms to curb massive public debt, already twice the size of the $5 trillion economy.
"If anything, the political fiasco is expected to be positive for Japanese government bonds, as such news tends to impact equities negatively," Koichi Ono, a senior strategist at Daiwa Securities Capital Markets, said.
"But if the confusion drags on, then even the bond market will have to begin taking notice as it means fiscal reform will be put on hold."
Kan has made fiscal reforms including a rise in the 5 per cent sales tax a priority but has failed to get opposition parties to join in talks on the topic.
Yukio Edano, the chief cabinet secretary, will serve temporarily as foreign minister while Kan picks a successor, who will have a full plate managing strained ties with China and Russia and keeping relations with ally Washington on an even keel.
'Lack of governing ability'
Ritsuo Hosokawa, Kan's health minister, is also under fire for messy handling of measures to help housewives who had mistakenly failed to pay their pension premiums, and media warned more cabinet ministers could quit in a "domino effect".
Kan faces pressure from within his own fractious Democratic Party of Japan (DPJ) to step down, while opposition parties are pushing him to call a snap election in the powerful lower house.
"This has revealed the Kan administration's lack of governing ability, and the only ways to break through this situation are for the cabinet to resign as soon as possible or for a snap election to be called," Kenji Kosaka, a lawmaker in the main opposition Liberal Democratic Party (LDP), told reporters.
Jiji news agency quoted an LDP executive as saying the main opposition party could submit a censure motion against the prime minister this month.
A Yomiuri newspaper poll released on Monday showed that 51 per cent of voters wanted Kan to resign, with 56 per cent saying they'd blame the government and DPJ if bills needed to enact a $1 trillion budget for the year from April are not passed on time.
The 2011/12 budget itself can be enacted by parliament's lower house alone. But related bills to implement it require approval of the upper chamber, where the opposition have threatened to use their majority to block legislation.
Some analysts said Kan may hang on to office in the hope that public opinion will eventually force opposition parties to compromise, some analysts said.
"In order to quit, he would need to accomplish something by doing so. But there is no prospect that the budget bills would pass if he resigned," Yasunori Sone, a Keio University professor, said.
"So even if his administration is falling apart, he must hang on ... He cannot even call an election."
Others said Kan might step down in return for opposition help passing the budget and a promise to call an early election.
The DPJ could fall from power if an election were held soon but the problem of the divided parliament would likely remain since no single party would have a majority in both chambers no matter who wins.
Maehara admitted accepting 250,000 yen ($3,000) in political donations between 2005-2010 from a Korean resident in Japan. Taking political donations from foreign nationals is illegal if done intentionally.