Japanese Finance Minister Shoichi Nakagawa resigned on Tuesday after being forced to deny he was drunk at a G7 news conference, dealing a fresh blow to unpopular Prime Minister Taro Aso in an election year.
Nakagawa said Aso -- who a day earlier told his close ally to stay in his post despite an uproar over the minister's behaviour -- had accepted his resignation.
Aso had been leaning towards tapping Economics Minister Kaoru Yosano to succeed Nakagawa, Japan's Kyodo news agency reported before Nakagawa formally submitted his resignation, an appointment that would spell little change for policymaking.
The government is trying to lift Japan out of its worst economic slump since the 1974 global oil crisis.
Nakagawa had earlier offered to step down after parliament passed budget bills, a process that could have taken weeks. That failed to satisfy the government's junior coalition partner and an emboldened opposition, which both demanded he go immediately.
The fuss over Nakagawa's behaviour and now his resignation comes as Aso's own public support is crashing -- below 10 percent in one recent survey -- ahead of an election the conservative Liberal Democratic Party (LDP) is in danger of losing after more than half a century of almost unbroken rule.
Kyodo said Yosano, 70, would keep his current post and also take over Nakagawa's other portfolio in charge of banking supervision.
Yosano, a fiscal hawk who has become more flexible about spending as the recession deepens, came second to Aso in an LDP leadership race last September, and has since been a linchpin of the administration.
At the Group of Seven news conference in Rome, Nakagawa slurred his words and appeared to fall asleep at one point.
He has said he had not done more than sip some wine before the news conference and cold medicine had affected his behaviour.
"I have caused trouble to the people," Nakagawa told an earlier news conference. "I apologise for causing commotion from my careless health management."
Aso -- Japan's third prime minister in less than two years -- is trying to pass an extra budget for the fiscal year ending on March 31 as well as a record 88.5 trillion yen ($965 billion) budget for the year to March 2010 to help stimulate the economy, now sinking deeper into recession. [ID:nT74412]
Media polls show the Democrats have a good shot at ousting Aso's LDP in an election that must be held by October. [ID:nT99504]
About the only bit of good news for Aso was an invitation to meet U.S. President Barack Obama in Washington on Feb. 24.
Visiting U.S. Secretary of State Hillary Clinton said it would make Aso the first foreign leader to meet Obama at the White House. Aso had accepted, Japanese officials said.
(Additional reporting by Chisa Fujioka and Tetsushi Kajimoto; Writing by Linda Sieg, Editing by Dean Yates)