By Linda Sieg and Tetsushi Kajimoto
TOKYO (Reuters) - Japan's National Tax Agency chief, under fire for remarks about a suspected cronyism scandal, quit on Friday, but his resignation was unlikely to end the furor over the affair that threatens to erode Prime Minister Shinzo Abe's popularity.
Finance Minister Taro Aso told a news conference that Sagawa, a former ministry official appointed to the tax post last July, had offered his resignation for causing confusion in parliament, where debate has been snarled over the affair.
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Sagawa has been accused of trying, last year, to dispel suspicion that a school operator with ties to Abe's wife, Akie, got a sweetheart deal on land for a school in the city of Osaka which helped slice the premier's popularity.
Aso, a close Abe ally, said Sagawa would take a temporary pay cut and might face more punishment.
But the unrepentant finance minister added that Sagawa had done a good job and his appointment was appropriate.
Aso, 77, also said he himself had no intention to quit over the affair. "Sagawa's resignation is regrettable. But I have no plan now to resign," Aso said.
Abe has denied that he or his wife did favors for the former head of school operator Moritomo Gakuen, Yasunori Kagoike. Kagoike and his wife were arrested in July on suspicion of illegally receiving subsidies.
Abe, in his sixth year in office and eyeing a three-year extension from September, had seemed to put the matter behind him with a big election win for the ruling bloc in October.
But opposition parties have turned up the heat again after the Asahi newspaper said some documents about the land sale might have been doctored.
That followed revelations that the finance ministry had retained documents that officials had said no longer existed.
Last year, Sagawa, then the head of the ministry's financial bureau, told parliament the materials had been discarded.
A senior lawmaker from the opposition Constitutional Democratic Party of Japan told reporters that Sagawa's resignation would not bring the affair to a close.
"If those in power intend to use Mr. Sagawa's resignation to draw a curtain (on the scandal), we cannot accept that. I believe this is a matter over which politicians should take political responsibility," Kiyomi Tsujimoto told reporters.
Aso, who doubles as deputy premier, could end up in the hot seat if it turns out that officials of his ministry altered approved documents.
Media said on Friday police were investigating as a possible suicide the death of an official at a finance ministry bureau that handled the land deal at the center of the scandal.
The official in the region where the school is located was found dead at his home on Wednesday and police are investigating the matter as a suicide, Kyodo and Jiji news agencies said.
A police spokesman declined to comment.
Chief Cabinet Secretary Yoshihide Suga told a regular news conference that he had been notified about the death of the official but declined to give any details. He said he did not know whether the official had been questioned by prosecutors.
Protesters demanding the resignations of Sagawa and Aso have gathered in front of the ministry in recent weeks.
The ministry on Thursday released to parliament hundreds of pages of what it said were copies of the original documents, but opposition lawmakers said their doubts remained.
Abe's ruling bloc has big majorities in both houses of parliament, so his grip on power appears unlikely to be at risk.
But falling support could complicate his bid for a third term as Liberal Democratic Party leader in a September party vote. Re-election would put him on track to become Japan's longest-serving premier.
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(Additional reporting by Kiyoshi Takenaka and Stanley White; Editing by Nick Macfie, Robert Birsel)