Explained | What is the fundraising scandal engulfing Japan's ruling party?

Japanese Prime Minister Fumio Kishida is battling to stem the fallout from one of the biggest financial scandals to hit his ruling Liberal Democratic Party (LDP) in decades.

Prosecutors have launched a criminal investigation into whether dozens of lawmakers received proceeds from fundraising events that saw millions of dollars kept off official party records.

Several cabinet ministers have already resigned over the scandal, while the Kishida administration's public support has dropped to around 20%, the lowest since he came to office in October 2021, raising doubts about his leadership and throwing his government into disarray.

Here are some key issues surrounding the scandal.

WHAT HAPPENED?

Japan's current Political Funds Control Act bans corporate donations to individual lawmakers. But there is a loophole.

It's legal for a political entity to raise funds through ticket sales to fundraising events and redistribute it to member lawmakers - as long as they file political funding reports.

However, in this case, the party's internal factions allegedly did not disclose the full amount of the ticket revenues transferred to some lawmakers, while some lawmakers also kept money that was not reported in their funding disclosures, according to media reports.

The prosecutors office said it could not immediately comment on any ongoing investigation when contacted by Reuters.

WHAT ARE THE SUMS INVOLVED?

The probe centres around the LDP's biggest and most powerful Seiwa-kai faction, formerly led by late prime minister Shinzo Abe and still referred to as the "Abe faction".

The missing funds amount to some 500 million yen ($3.52 million) transferred to several dozen member lawmakers including high-ranking officials over the past five years, according to media reports.

Japan's five-year statute of limitations under the Political Funds Control Act means prosecutors cannot bring charges for any unreported funding that occurred before 2018.

Chief Cabinet Secretary Hirokazu Matsuno, Trade Minister Yasutoshi Nishimura and the LDP's policy council chief Koichi Hagiuda are each alleged to have received proceeds worth between 1 million and 10 million yen, media reported.

All three of them have resigned but have not commented on the specific allegations.

Another Abe faction lawmaker Hiroyuki Miyazawa on Wednesday admitted receiving such proceeds in the past and said that faction officials had told him to keep off the books.

Meanwhile, prosecutors are also examining whether other LDP factions, including one that Kishida headed until last week, had engaged in similar schemes, according to the reports.

HOW DID THE ALLEGATIONS SURFACE?

The allegations were first reported more than a year ago by a newspaper run by the opposition Japanese Communist Party. Based on that report, an academic filed multiple criminal complaints to the Tokyo District Public Prosecutors Office.

Local media began reporting in early November that prosecutors had started looking into the allegations.

More than 50 prosecutors have been assigned to the case and have questioned lawmakers' accounting staff and secretaries, multiple news outlets have reported.

HAVE THERE BEEN SIMILAR SCANDALS IN THE PAST?

Money scandals have forced out a number of ruling administrations of the LDP, which has held power for nearly all of Japan's post-war era, and its short-lived rival.

In 1974, then-Prime Minister Kakuei Tanaka resigned after reports on his shadowy real estate businesses and was arrested two years later for an international bribery case involving the aerospace giant Lockheed.

In 1989, Noboru Takeshita lost his premiership after allegations surfaced over insider trading of private equity linked to human resources company Recruit that led to several other high-profile resignations from the party.

In 2010, during a brief period the LDP was out of power, Yukio Hatoyama resigned as premier due in part to allegations he and his Democratic Party officials under-reported fundraising proceeds.