TOKYO - JAPANESE Finance Minister Kaoru Yosano's political support group accepted illegal donations from a dummy organisation, a newspaper said on Wednesday, a report that could damage the ruling party ahead of an election.

The Mainichi newspaper quoted officials at Mr Yosano's office as saying they had no idea how the money had been raised, but they had no intention of returning it.

Officials at Mr Yosano's office declined to comment immediately, but Kyodo news agency quoted the minister as saying he did not believe there had been any wrongdoing.

'The donations came from a friend of 30 years,' he said. 'I don't believe there was any intention to hide anything.' There was no immediate reaction of the yen or on the Japanese stock market to the newspaper report.

Prime Minister Taro Aso must hold an election by October at the latest, in which polls show his long-ruling Liberal Democratic Party (LDP) risks losing to the Democratic Party.

Mr Yosano's support group accepted more than 55 million yen (S$840,000) in donations over a period of more than a decade from a dummy organisation that was funded by a futures trading company and related firms, the Mainichi Shimbun said.

Such indirect donations are not permitted under the political funding law, it said.

Mr Yosano also serves as financial services minister, a position that puts him in charge of regulating the futures trading industry. -- REUTERS