TOKYO: Japan's internal affairs and communications minister resigned Friday, dealing a setback to conservative Prime Minister Taro Aso just months before a general election.

Kunio Hatoyama, 60, the brother of Japan's opposition leader Yukio Hatoyama, quit over a long-simmering row related to the controversial privatisation of the country's huge postal service.

'I submitted my resignation,' Hatoyama told reporters after meeting Aso, whom he served as a close political aide for years. 'It's regrettable but I can't change my beliefs.'

Hatoyama had demanded Aso fire Yoshifumi Nishikawa, head of the privatised postal service, over Nishikawa's attempts to sell off postal assets at what Hatoyama called unreasonably low prices.

The minister accused the postal chief of a conflict of interest in trying to sell a key public asset of the service, a nationwide resort chain, at a price far below market value.

Hatoyama, who once headed Aso's election campaign office, had warned for weeks that if Nishikawa didn't go, he would.

Aso defended his decision not to dismiss Nishikawa, telling reporters: 'We should avoid government interference in the personnel affairs of a private company.'

Hatoyama's resignation was the third by a minister since Aso took office in September. Last February, then finance minister Shoichi Kakagawa stepped down after appearing to be drunk at a Group of Seven meeting.

Toru Toida, a close aide to Hatoyama and parliamentary secretary for health, labour and welfare, also resigned Friday as a sign of support for Hatoyama, Toida's secretary said.

After announcing his decision to step down, Hatoyama told reporters: 'The prime minister's decision this time was wrong, but I hope he will make correct decisions in the future.'

He added that it was inevitable Aso would be criticised for not dismissing Nishikawa and said: 'History will prove me right... not in 50 years or 60 years, but in a year or so. The people are watching us.'

Aso had accepted his resignation and told him 'it's sad,' said Hatoyama.

Hatoyama's resignation comes as Aso's public support fell to 24.1 percent, according to an opinion poll released Friday by Jiji Press.

The general election must be held sometime between now and October, with most pundits tipping a poll in August or early September.

'This is certainly a blow to Prime Minister Aso, as the noise over this issue in recent weeks made his leadership look weak,' said Junichi Takase, politics professor at Nagoya University of Foreign Studies.

Aso was put in a quandary by the festering row as some heavyweights in his Liberal Democratic Party (LDP) back Nishikawa, the former governor of the private mega-bank Sumitomo Mitsui Financial Group.

Hatoyama was asked by journalists whether he would work with his elder brother's Democratic Party of Japan, which in this year's election hopes to end nearly half a century of unbroken rule by the LDP.

He replied: 'I don't think there will be cooperation.'

Asked about his next move, Hatoyama said 'I'll consult with my friends.'

He will be replaced by Tsutomu Sato, head of the National Public Safety Commission, a police oversight body, the government said.