By Stanley White and Leika Kihara
TOKYO (Reuters) - Japanese Economy Minister Akira Amari resigned abruptly on Thursday to take responsibility for a political funding scandal that has rocked the government, but denied having taken bribes.
The resignation of Amari, who has spear-headed Prime Minister Shinzo Abe's economic policies, could pose a setback to the administration's "Abenomics" growth plan aimed at driving Japan out of deflation, analysts said.
But the government moved swiftly to contain the fallout by appointing Nobuteru Ishihara, a former minister and secretary-general of the ruling Liberal Democratic Party, as his replacement.
In a packed news conference televised live, Amari acknowledged taking money from a construction company executive but said he told his aides to correctly record the funds as a political donation.
While asserting his legal innocence, Amari said he was stepping down to prevent the scandal from being a distraction to the Abe administration's drive to pull the country out of deflation.
"Japan is finally emerging from deflation," he said. "We need to pass legislation through parliament for steps to beat deflation and create a strong economy as soon as possible."
"Anything that hampers this must be eliminated, and I'm no exception. I, therefore, would like to resign as minister to take responsibility" for what he said his aides had done.
Part of the money has gone missing because of mishaps by his secretaries, Amari said, but two of them have resigned and he must take responsibility as their supervisor.
Just hours before the news conference, Amari had said he would fulfill his duties as minister "with utmost effort".
The yen <JPY=>, considered a safe haven from risk, ticked higher on Amari's resignation, while Nikkei stock futures slipped.
Amari is a close ally of the prime minister and a core member of his policy team. He led Japan's negotiations for the Trans-Pacific Partnership free trade bloc.
"This is definitely not good news for Abe and it's going to make it harder to sell the TPP," said Jeffrey Kingston, director of Asian studies at Temple University's Japan campus.
"Corruption is just not something that goes down well with voters, and there's going to be a lot of media scrutiny. It's going to be a bit of a rough road."
Last week, Japanese magazine Shukan Bunshun published an article accusing Amari and his aides of accepting money from an unnamed construction company in exchange for helping that firm receive government compensation for disputes over land ownership and waste removal at a public works site.
SUCCESSOR NAMED QUICKLY
Less than 90 minutes after Amari announced his resignation, Prime Minister Abe named Ishihara as his replacement and stressed that reforms would continue.
"Abenomics is at a critical juncture. I'd like him to use his full capacity to pull Japan out of deflation and put its economy on a growth path," Abe told reporters.
Ishihara is the son of outspoken nationalist Shintaro Ishihara, a former governor of Tokyo, but is seen as less extreme in his views than his father. He served as environment and nuclear crisis minister under Abe and was also secretary-general of Abe's ruling Liberal Democratic Party.
Hidenobu Tokuda, senior economist at Mizuho Research Institute in Tokyo, said he would want to see how Ishihara manages his new role but does not expect an immediate impact on monetary or fiscal policy.
"He doesn't have much previous experience in the cabinet. By chosing someone with less experience, this could give Abe and his office even more influence over economic policy," Tokuda said.
The accusations on bribery come at a sensitive time because policy makers are already grappling with a stock market sell-off, a rising yen and worries about a weakening global economy.
(Additional reporting by William Mallard, Kaori Kaneko, Tetsushi Kajimoto, Elaine Lies and Minami Funakoshi; Editing by Chang-Ran Kim, Ryan Woo and Jacqueline Wong)