BBC correspondent Juliet Hindell: 'Hashimoto appeared crushed'

His resignation has prompted fears that political uncertainty in Japan will renew market turmoil in the rest of Asia.

Mr Hashimoto resigned on Monday following a heavy defeat in parliamentary elections to Japan's upper house.

He announced he was stepping down after publicly accepting responsibility for the defeat suffered by his ruling Liberal Democratic Party (LDP) in the poll. Other key government officials resigned at the same time.

Fears of a political vacuum

Voters were dissatisfied

Mr Hashimoto remains as prime minister until a successor is chosen, but correspondents say leading members of the ruling party are jostling for position, and it is not clear who will take over.

A BBC correspondent in Japan says that, with Japan's economy - the world's second largest - suffering its worst recession since World War II, the last thing the world's financial markets want to see is a political vacuum.

The BBC's Juliet Hindell: quite a few people would like to be PM

The correspondent says foreign minister Keizo Obuchi and former chief cabinet secretary Seiroku Kajiyama are two possible candidates for successor, but that neither of these LDP powerbrokers is seen as an economic specialist and may not inspire much confidence.

Still a majority in lower house

The LDP, which has had an almost complete monopoly on power for over 50 years, lost 17 seats in the Upper House.

The party still has a substantial majority in the more powerful lower house, and is not in immediate danger of falling.

However, the upper chamber can delay legislation for up to 60 days, although it cannot reject decisions made by the lower house.

Japanese foreign ministry spokesman Sadaaki Numata on what the elections mean for Japan

The result may influence the speed at which badly-needed economic reforms - including the LDP's plans for a "bridge bank" to clean up Japan's huge debts - are introduced.

Analysts say the party may decide to seek help from opposition parties in forming a coalition government to help get legislation passed more smoothly.

Economic fallout

Markets are worried about the economy

Share prices and the yen tumbled following the LDP defeat, but recovered in later trading.

There was an unexpectedly high turn-out as voters registered a protest at the government's handling of the economy, which has slumped into recession.

The upper house elections were seen as a referendum on the government's attempt to pull Japan out of its worst recession since World War II.

Mr Hashimoto acknowledged responsibility for the result in a television interview. He made his resignation known at a press conference after meeting of senior LDP figures on Monday.

"As all politicians do, I will make, in my heart, my own decision about my political future. I will make a decision that will be reasonable in my mind," he said.