The tiny Social Democratic Party decided on Sunday to leave Japan's ruling coalition, an official said, after the prime minister dismissed its leader from his cabinet for opposing a deal to keep a US Marine base on Okinawa.
The decision was made at a meeting of the party's senior officials, Minoru Hosoda, secretary general of the party's federation in Shimane Prefecture, told reporters.
The departure of the SDP would be a blow to Hatoyama, already seen by voters as a weak leader, damaging his Democratic Party's chances of winning a majority in an upper house election expected in July. It needs an upper house majority to pass bills smoothly.
But the SDP's departure would not force the Democrats out of power since they boast a massive majority in parliament's more powerful lower house.
On Friday, Hatoyama dismissed SDP leader Mizuho Fukushima from her cabinet post after she refused to sign off on a US-Japan deal to move a US Marine base on the southern island of Okinawa from a city center to a less heavily populated area.
Hatoyama raised hopes during his successful election campaign last year that the Futenma base could be moved out of Okinawa entirely, and abandoning that pledge has angered not only the SDP, but local residents as well.
Coalition and opposition parties called for Hatoyama to resign for failing to keep his promise on Futenma or to meet a self-imposed, end-of-May deadline for finding a solution acceptable to all the parties.
He said on Saturday he would stay on. Some in his own party think he should step down, but time is short for replacing him ahead of the upper house poll, expected on July 11.
Hatoyama's government is seen to have wobbled on a range of promises, from cash allowances for parents of young children to abolishing highway tolls, as it struggles to nurture a fragile economic recovery while reining in ballooning public debt.
"The prime minister said he was putting his job on the line, so naturally, he should resign," said Yoshihisa Inoue, secretary-general of the opposition New Komeito party.
"I think that Futenma symbolizes the problem with the nature of the Hatoyama cabinet and politics, that they easily break promises with the people and apologize but take no responsibility."