Japan's Finance Minister Hiroshi Mitsuzuka has said he would resign to atone for a bribery scandal involving ministry inspectors.

Mr Mitsuzuka told reporters after Prime Minister Ryutaro Hashimoto that he would hand in his resignation to the premier. The fate of the embattled finance minister had come into question after raids in the past two days on Finance Ministry offices and on banks suspected of bribing ministry officials to find out the schedule for inspections by regulators.

The powerful ministry's headquarters was raided on Monday by prosecutors and two officials were later arrested.

The willingness of Japanese political elders to sacrifice Mitsuzuka mounted yesterday as the investigation involving his ministry gained momentum.

The scandal has hamstrung the government's hopes of quickly passing a sorely needed supplementary budget for the fiscal year to March 31.

The steering committee of the ruling Liberal Democratic Party and opposition parties yesterday evening proposed that Mitsuzuka should resign on condition that this extra budget be passed no later than today.

Earlier, prosecutors raided the offices of four banks suspected of bribing the two MOF inspectors with lavish entertainment and other favours in exchange for advance word on inspections and lenient oversight.

The enormity of the affair is far greater than may meet the eye. It comes at a time when Japan's economy is in tatters amid slumping domestic demand, flagging growth, a mountain of bad corporate debt and a shaky yen.

Against this backdrop, the spectacle of prosecutors carting boxes of documents out of the once-sacrosanct Finance Ministry has badly damaged confidence in Hashimoto's government.