The Japanese Prime Minister, Mr Ryutaro Hashimoto, is expected to offer his resignation at a meeting of senior officials of the ruling Liberal Democratic Party (LDP) in Tokyo today after a major setback in Japanese elections which has sent political and economic shock-waves across Asia.
Last night Mr Hashimoto said: "After all the ballots are counted, and the party meeting is held, I will express my intention. As all politicians do, I will make, in my heart, my own decision about my political future."
The Prime Minister accepted responsibility for the disastrous showing of his party which lost 17 seats in the vote for half the seats in the 252-member Upper House of parliament.
The LDP policy chief, Mr Taku Yamasaki, said the party's executive committee must resign to take responsibility for the defeat.
The vote does not force the LDP out of power since it still controls a comfortable 13-seat majority in the more powerful Lower House. But Japanese media quoted Mr Hashimoto's colleagues as saying that with the poor showing for the party, whose share of seats in the upper chamber fell from 61 to 44, he too had no choice but to step down.
Voter anger over Mr Hashi moto's handling of the economy, and a badly-handled last-minute promise of permanent but unspecified tax cuts, appears to have turned the electorate against the LDP.
Japan recently went into recession for the first time since the 1980s and the election became a referendum on the Prime Minister's handling of the world's second largest economy.
Observers also blamed President Clinton for making Mr Hashimoto lose face when he did not visit Japan at the end of his recent trip to China.
Mr Hashimoto may have to cancel a trip to the US scheduled for July 21st, a party source told Japanese TV. The LDP defeat comes as the Russian Prime Minister, Mr Sergei Kiriyenko, arrives in Japan today for a crucial meeting on Russia's economic crisis.
The deepening political uncertainty in Japan is expected to reverberate through Asia's battered financial markets this morning. The Organisation of Economic Co-operation and Development (OECD) warned yesterday that the future of financial markets lies in the hands of Japan, where the management of the economic slump and weakness in the yen will have reverberations around the world.
The Paris-based organisation said in its thrice-yearly Financial Markets Trends report that "the prospects for a return to stability in emerging bond and equity markets will depend on how successful policy-makers are in addressing the major uncertainties that have affected these markets".
Singapore's Finance Minister, Mr Richard Hu, warned that Singapore could suffer from a bad result for the ruling party. "What happens in Japan would have a large impact on the whole region, including us," he said.
Mr Hashimoto is likely to have to seek the help of a former prime minister, Mr Yasuhiro Nakasone - a king-maker whose wing of the party was not affected by the electoral setback - to determine a new leader.
The man most likely to be the next Japanese leader, he said, is a Nakasone protege, Mr Seiroku Kajiyama, a former chief cabinet secretary. The Foreign Minister, Mr Keizo Obuchi, is also a possible contender for the top post.
Official figures showed the Democratic Party won 27 seats, followed by the Communist Party with 15 seats.
The Buddhist-backed Komei party won nine seats, while the Liberal Party won six. The Social Democrats won five.
The remaining 20 seats went to independent candidates.