Japanese prosecutors will build a case against a former accountant of a ruling Liberal Democratic Party faction, previously led by Prime Minister Fumio Kishida, in connection with a political fundraising scandal, sources close to the matter said Thursday.

The prosecutors have been investigating several LDP factions amid allegations that they failed to report revenue from fundraising parties in violation of the political funds control law.

Prime Minister Fumio Kishida speaks to reporters at his office in Tokyo on Jan. 18, 2024. (Kyodo)

The latest development is certain to deal a further blow to Kishida, with his Cabinet's approval ratings having plummeted to the lowest levels since it was launched in October 2021, partly due to the funds scandal.

The former treasurer of the faction, which Kishida left in early December, is expected to face a summary indictment as early as Friday for allegedly failing to declare around 30 million yen ($203,000) over the three years through 2020, the sources said.

Asked about the issue, Kishida told reporters on Thursday morning that he had been briefed about an "accumulation of errors" made by the faction that were in the process of being corrected, adding he was not aware of "something more than that."

Later in the day, the faction submitted a correction to political funds reports for three years through 2022 to the Ministry of Internal Affairs and Communications, government officials said.

The Kishida faction admitted having failed to report its revenue, attributing the cause to errors in bookkeeping.

The faction said it did "not intend" to reimburse excess sales quotas for faction party tickets to its members, while pledging to develop a sufficient management system through external supervision to prevent a recurrence.

The sources also said the accountant failed to include a portion of ticket sales in the political funds reports because the faction did not track the amounts raised by lawmakers, but the money was not returned to its members as in some other factions.

The prosecutors have not found such errors in the faction's political funds reports for 2021 and 2022, when it was led by Kishida, which were filed after the accountant was replaced, the sources said.

The prosecutors, meanwhile, plan to build a case against a secretary of former LDP Secretary General Toshihiro Nikai for allegedly failing to report a portion of party ticket revenue that surpassed quotas set for the lawmaker, the sources said.

The faction's slush funds are likely to have amounted to tens of millions of yen, the sources added.

LDP factions have traditionally set lawmakers quotas for the sale of party tickets, usually priced at 20,000 yen. In some groups, if lawmakers surpass their targets, the extra funds are passed back to them as a type of commission.

The LDP faction formerly led by late Prime Minister Shinzo Abe is suspected of failing to report hundreds of millions of yen in fundraising party revenue and creating slush funds over the five years through 2022.

An accountant of the Abe faction, the largest in the LDP, is set to be indicted without arrest for returning a portion of ticket sales revenue to lawmakers without reporting it, the sources said.

In the Abe faction, Yasutada Ono and Yaichi Tanigawa, suspected of receiving more than 50 million yen and around 40 million yen, respectively, from slush funds, are expected to face criminal charges, possibly on Friday, the sources said.

Yoshitaka Ikeda, a lawmaker who belonged to the Abe faction known as Seiwaken, or the Seiwa policy study group, has already been arrested over similar allegations. He was expelled from the LDP.

The political funds control law requires accountants to submit reports on income and expenditure. Failure to report can result in imprisonment for up to five years or a fine of up to 1 million yen.

The prosecutors have been investigating whether senior lawmakers in the Abe faction, including former Chief Cabinet Secretary Hirokazu Matsuno, colluded with the accountant and have questioned them on a voluntary basis.

But the prosecutors are unlikely to build a case against them after failing to find evidence of such collusion, the sources added.

In another move, Kishida held talks at his office on Thursday with Natsuo Yamaguchi, leader of the Komeito party, the junior partner of the LDP, to exchange views on the recent funds scandal.

Yamaguchi quoted Kishida as saying the LDP is aiming to announce an interim report compiled by its "political reform" panel next week at the earliest. The panel was set up by Kishida in January to establish rules to enhance the transparency of political funds.

So far, the panel has been considering proposing the revision of the political funds control law to toughen the penalties on offenders, LDP sources said, with others calling for the introduction of guilt by association between lawmakers and accountants.

The major focus is on whether Kishida will make a critical decision to disband all of the LDP factions in an attempt to rebuild public trust, political pundits said.

Kishida told reporters later Thursday that the faction that he had headed should be dissolved, if the action contributes to restoring confidence in politics.

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