Mr Miyazawa, who was brought in to turn the country's stagnant economy around, made his announcement after just four months in the job.

He did not say exactly when he plans to go, but it is expected to be before the next session of parliament in January.

Mr Miyazawa also intends to hand over his leadership of a faction within the governing Liberal Democratic Party to Koichi Kato, an influential politician who has been tipped as a future prime minister.

The BBC's Tokyo correspondent Juliet Hindell says although Mr Miyazawa was appointed for his high-level contacts and influence he has been largely sidelined in the making of economic policy.

However, he did draw up a plan providing $30bn in loans for crisis-hit Asian countries.

Mr Miyazawa, 79, a former prime minister, said: "I have been telling senior members of my faction that I'm ready to hand over my position as faction head to Koichi Kato.

"Once I resign, it wouldn't be appropriate to stay in the cabinet."

His announcement comes just as the Japanese Government adopts a supplementary budget to finance a massive economic stimulus plan.

The plan is partly the result of political compromises with opposition parties, some of which have not pleased Mr Miyazawa.

But he said he would time his departure so that it does not affect the passage of the crucial bills aimed at jump-starting the economy.

"I am well aware of the very difficult situation the Japanese economy is now facing. Thus I will see that (my resignation) will not cause any delay (in economic stimulus steps)," Mr Miyazawa added.

'An antique like me will cause trouble'

Mr Miyazawa had appeared reluctant to take on the job when he was appointed on 31 July, when Keizo Obuchi was elected prime minister.

"I'm out of the picture. [It] will cause trouble if an antique like me joins the cabinet," he said at the time.

But Mr Miyazawa was seen as a heavyweight with a wealth of contacts in Washington, which has led international pressure on Tokyo for an economic recovery.

Mr Miyazawa, who worked in the finance ministry during World War II, won his first election victory in 1953, representing Hiroshima.

He was finance minister from 1986 to 1988 after joining the ruling party's mainstream faction.

Critics blame his low-interest rate policy for helping produce the "bubble economy" of the late 1980s, which collapsed at the start of the 1990s.

He rose to become premier in 1991, but his cabinet fell two years later after losing a no-confidence motion sparked by a bribery scandal.