The embattled Your Party is set to name a new leader as early as Friday to replace Yoshimi Watanabe, who Monday expressed his intention to resign as party chief amid a money scandal.

The party’s policy research chief, Kenichi Mizuno, said Tuesday that an election is likely to be held during Friday’s meeting of party members. Watanabe’s resignation was approved at an executives’ meeting Tuesday.

Regardless of who becomes the new leader, the minor opposition party’s influence in politics is expected to be significantly diminished as it has been touting a scandal-free image.

Watanabe’s absence could strike a heavy blow to the ruling Liberal Democratic Party as well, while Prime Minister Shinzo Abe seeks cross-party cooperation to lift Japan’s self-imposed ban on collective self-defense. Watanabe has supported the conservative prime minister’s efforts to re-interpret the Constitution to exercise the right of collective self-defense.

Your Party, which was founded by Watanabe in 2009, effectively served as a complementary force to the LDP through its cooperation in enacting the contentious state secrecy law last December.

Yet, observers say, that cooperation was based on the close relationship Watanabe personally forged with Abe rather than party consensus. Watanabe also served as state minister for financial policy and administrative reforms during Abe’s first administration between 2006 and 2007.

Watanabe on Monday said he will step down as party chief amid rising criticism about an ¥800 million loan he borrowed from Yoshiaki Yoshida, chairman of major cosmetics company DHC Corp.

Yoshida extended a ¥300 million loan to Watanabe shortly before the 2010 House of Councilors election and then gave him another ¥500 million before the 2012 House of Representatives election.

Watanabe never logged those loans in his official political or election funds report and he denied violating the Political Funds Control Law, insisting that the loan was for personal expenses, not official political activities or his election campaign.

Watanabe’s resignation will also likely accelerate realignment in the opposition camp, which has been unable to exert much political clout against the ruling coalition, which is led by the LDP.

Political analyst Harumi Arima said Yui no To, headed by former Your Party Secretary-General Kenji Eda, and Nippon Ishin no Kai (Japan Restoration Party), led by Osaka Mayor Toru Hashimoto and former Tokyo Gov. Shintaro Ishihara, hold the key to any realignment.

The two parties have been in talks to form a partnership and Nippon Ishin last week decided it will aim to merge its parliamentary group in the upper chamber with Yui no To by the end of the current Diet session. Yui no To was formed by 15 former Your Party members, who were against Watanabe’s cozy relationship with Abe.

Watanabe banned any Your Party members from joining cross-party meetings between the Democratic Party of Japan and Nippon Ishin as well as Yui no To to discuss possible political remapping in the opposition camp, because he apparently did not want to lose his clout in the process to bring about political realignment.

“By integrating parties’ parliamentary groups, the two parties are forging an environment to further merge their parties . . . possibly offering an environment for Your Party members to join force,” Arima said.

Arima added that Hashimoto and Eda seem to be speeding up their efforts in time for nationwide local elections, slated to be held next April.

Meanwhile, DPJ leader Banri Kaieda wants his party to take the initiative to bring about political realignment.

But former party Secretary-General Goshi Hosono continues to meet Nippon Ishin Secretary-General Yorishisa Matsuno and Eda of Yoi no To to discuss possible cooperation.

Aiming to consolidate his power base within the party, Hosono formed his own political group, Jisei Kai, and on Monday organized the party’s first political fundraising event.

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