Former Prime Minister Ryutaro Hashimoto said Friday that he will resign as chairman of the ruling Liberal Democratic Party’s largest faction because of a political donation scandal.

The announcement came during an extraordinary faction meeting held at LDP headquarters in Tokyo.

Hashimoto said he will leave the faction, called Heisei Kenkyukai (Heisei Study Group), and not run from his single-seat constituency in the next House of Representatives election, meeting participants said.

Hashimoto reportedly said that he might run in the proportional representation part of the ballot if he receives backing from the party.

The faction has been rocked by allegations that it did not report as a political donation a check for 100 million yen Hashimoto received from the political arm of the Japan Dental Association in July 2001.

Hashimoto’s resignation, though expected, will probably further weaken the faction, which had yet to name a successor to the former prime minister as of Friday.

Former Lower House Speaker Tamisuke Watanuki has been considered a candidate to succeed Hashimoto, but he has reportedly declined.

“We’ll decide on that later,” a grim-faced Yuji Tsushima, the faction’s director general, told reporters after emerging from the day’s meeting.

Hashimoto reportedly received the check from then Japan Dental Association Chairman Sadao Usuda, 73, in the presence of other faction executives.

But the money was not listed in the faction’s annual political donation report — a violation of the Political Funds Control Law.

The faction admitted it received the donation, but Hashimoto had claimed he does not remember receiving the check from Usuda, who has since been arrested in connection other alleged offenses.

During Friday’s meeting, Hashimoto acknowledged he found a note showing he had met with people from the association on July 2, 2001.

But he still claimed he does not remember who he met or what he did during the meeting, according to a participant at Friday’s meeting.

Also Friday, lawmakers in the Democratic Party of Japan said they lodged an accusation with prosecutors against Hashimoto for allegedly not declaring the donation.

While Hashimoto was widely seen as being the faction’s leader in name only, his resignation is still a blow to the already fractious group.

Since last year’s LDP presidential election, the Hashimoto faction has been deeply split between those supporting Prime Minister Junichiro Koizumi’s re-election and those who opposed him.

In the race, the pro-Koizumi members united under faction heavyweights Mikio Aoki and Fukushiro Nukaga, who is seen has one of its younger stars, while anti-Koizumi members backed Koizumi’s rival, Takao Fujii.

In its heyday, the faction, whose roots go back to the faction founded by the late Prime Minister Kakuei Tanaka, dominated the LDP and thus the political arena.

But the power of the LDP’s factions has plunged over the past decade, due to stricter laws concerning political funds and the introduction of a single-seat election system in the Lower House, and the Hashimoto faction was no exception.

Hashimoto became faction leader in July 2000, after the sudden death of then Prime Minister Keizo Obuchi in May that year.

But political insiders say the faction was effectively run under a joint-committee system through the leadership of several other executives, including veterans Aoki, Hiromu Nonaka and Kanezo Muraoka, who contributed considerable sums of money to the group every year.

This collective leadership style has shown that a single boss can no longer raise the political funds needed to cover elections and other expenses or exert great, dictatorial, clout over faction members.

The faction’s political funds reports show that Hashimoto made no donations in fiscal 2001 or 2002.

Hashimoto faction executives are well aware of the changing environment and the weakening power of the group, although they still stress that power struggles among the factions have been a source of political dynamism within the party.

“Some members argued that factions have lost their meaning, but a majority argued otherwise,” a Hashimoto faction executive said Thursday.

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