Saying that Prime Minister Taro Aso rejected his call to scrap the plan and other demands, former administrative reform minister Yoshimi Watanabe left the Liberal Democratic Party (LDP) after mulling over his move for more than a week.

He told reporters: 'I asked PM Aso to give the 2 trillion yen to local governments to use and to drastically reform the bureaucratic system. But he has ignored or rejected them.'

Mr Watanabe last night joined several opposition parties in boycotting the vote on the budget, which also contains measures to help small businesses, households and regional economies combat the recession.

Following its passage through the Lower House yesterday, the extra budget is to be submitted to the opposition-dominated Upper House, where it is expected to be rejected.

But the extra budget Bill can still become law if it is subsequently returned to the Lower House for a second vote and approved by a two-thirds majority.

Analysts point out that the second vote can be jeopardised if a minimum of 17 LDP members decide to vote against the Bill.

Mr Kenta Matsunami, a parliamentary secretary and an LDP lawmaker, did not vote for the budget Bill last night to protest against the cash handout plan.

He later resigned his parliamentary secretary post but said he was not leaving the party.

It is believed there are other LDP lawmakers who also oppose the cash handout plan.

But their numbers are not clear and there is no indication if they will follow Mr Watanabe and bolt from the party.

'Watanabe exited the party as he is confident of regaining his seat in the next election, even if he runs as an independent,' said political analyst Harumi Arima.

'But other disgruntled LDP lawmakers are likely to be defeated if they do the same thing. So they have to stay in the LDP,' he added.