Japan's Finance Ministry on Friday acknowledged that its former top bureaucrat had sexually harassed a female reporter and cut his retirement benefits.

Former Vice Finance Minister Junichi Fukuda confirmed he had met with the reporter but denied sexually harassing her, officials said. The ministry reached its conclusion after Fukuda failed to present a convincing argument or evidence to counter the reporter's allegation.

After reducing his final pay by 1.41 million yen, Fukuda's retirement benefits will come to 51.78 million yen ($473,000). His resignation was approved by the Cabinet this week but his retirement benefits were put on hold.

"It's very regrettable and (we) deeply apologize," senior ministry official Koji Yano told a press conference, adding that it was necessary to create an organization to monitor sexual harassment complaints.

TV Asahi had protested to the ministry that one of its female employees was sexually harassed by Fukuda.

The ministry said it would end its investigation into the allegation, adding it did not want to place an additional "psychological burden" on her. It has already asked TV Asahi to convey its apology to her, Yano said.

The female employee expressed regret that Fukuda did not admit to sexual harassment.

"It's unfortunate that he did not admit to the sexual harassment, but I recognize that the Finance Ministry acknowledged it and apologized," the female employee said in a statement through TV Asahi.

The broadcaster asked for a "continued, detailed" investigation to prevent a recurrence and an apology from the former top official himself.

It is the first time that the Finance Ministry, regarded as the government's most powerful ministry, has punished an official for sexually harassing someone outside of it.

Last week, Fukuda offered to resign, saying it had become difficult to perform his duties at a time when the ministry is mired in a number of controversies. He is planning to file a defamation lawsuit against the publisher of the magazine that first reported the story.

(Aso reads a magazine article on Fukuda)

Shukan Shincho magazine reported earlier this month that Fukuda had made sexually suggestive comments to female reporters. It later released an audio clip allegedly of Fukuda asking a female reporter "Can I give you a hug?" and "Can I touch your breasts?"

TV Asahi then said the victim was one of its female employees, adding she had handed the audio recording to the weekly magazine.

Finance Minister Taro Aso had said the ministry needs to hear both sides, but the way it sought to gather facts was also criticized as lacking neutrality and sensitivity.

The ministry asked female reporters who feel they have been sexually harassed by Fukuda to contact a law firm selected by it in mid-April. The firm received one phone call from an anonymous person, the official said.

The sexual harassment allegations have become yet another headache for the government of Prime Minister Shinzo Abe, already shaken by multiple scandals that have led to declining public support.

The Finance Ministry has faced a barrage of criticism since acknowledging it doctored records pertaining to the heavily discounted sale of state-owned land to a school operator that had ties to Abe's wife Akie.

Aso himself has faced growing calls from opposition parties to resign for having picked Fukuda for the post. But the prime minister has said he has no intention of doing so, adding his priority is to uncover the truth and take measures to ensure there is no recurrence of wrongdoing.