"Shadow Shogun" Ichiro Ozawa and his supporters on Monday stormed out of Japan's ruling party in protest at a sales tax hike, in a move that reduces, but does not overturn the government's majority.
The 50 lawmakers -- 38 from the lower house and 12 from the upper chamber of parliament -- submitted their resignations to Prime Minister Yoshihiko Noda's Democratic Party of Japan (DPJ), Ozawa said.
"We left the DPJ today ... intending to form a new party," Ozawa told reporters.
"The DPJ under Prime Minister Noda is no more the DPJ that achieved a power change" in 2009 when it ended the Liberal Democrats' nearly unbroken half-century reign, Ozawa said.
Exactly when the new party will be born will be discussed in a few days, Ozawa said, adding that its platform is likely to include opposition both to the tax hike and to restarting nuclear reactors in the wake of the Fukushima atomic crisis.
The widely-anticipated bolt is a blow to Noda, but is not big enough to deprive him of his majority in the lower house, which has the power to appoint prime ministers.
Many of the defectors were among the 57 DPJ lawmakers who voted last week against legislation to double consumption tax to help pay off Japan's mountainous debt.
Noda offered an apology for the "worries" caused to voters and supporters over the party split, but affirmed his pledge to enact the tax hike bills.
After months of furious horse-trading that brought the two largest opposition parties on board, the bills cleared a lower house ballot easily and passage through the upper house looks to be in little doubt.
Noda, who has staked his premiership on a tax rise widely believed to be a sensible way for Japan to begin plugging its fiscal hole, had warned he would deal with party dissidents "strictly, following party rules".
However, the leadership had been seen soft-pedalling the rebellion, not wishing to upset the balance in a party that is strung together by loose alliances and often struggles to find any binding ideology.
Ozawa, a former leader of the DPJ, had until Monday headed the largest faction within the party he is credited with leading to power in 2009.
Over four decades, Ozawa has earned the nicknames "The Destroyer" and "Shadow Shogun" for his record of creating and wrecking political alliances and striking behind-the-scenes deals that advance his agenda.
His formidable war chest and wide-ranging connections have enabled him to build a significant powerbase in parliament, with a large number of lawmakers owing tribute because of his role in securing their seats.
The 70-year-old Ozawa, who led the DPJ from 2006 to early 2009 shortly before the party was swept to power, had been somewhat knocked off his axis by a political funding scandal that forced him from the front line.
He was cleared in April of charges of illegal use of political funds and has since mounted something of a comeback.
However, his power to wreak havoc is diminished, and although he wields influence in political circles, he is deeply unpopular with the public at large, for whom he represents the big money politics that has so bedevilled Japanese governance for years.
Ozawa's particular complaint this time has been Noda's plans to double consumption tax from the current five percent by 2015.
Noda has warned that the future of the world's third-largest economy rests on tackling its huge public debt, which at more than double GDP, is proportionately the world's largest.
But opponents of the tax rise say any increase in household bills would derail Japan's uncertain economic recovery.
Analysts say Ozawa's move is unlikely to prove fatal to Noda in the short-term, but the party as a whole is in trouble.
"This is the same terminal condition the Liberal Democratic Party (LDP) experienced" when the party gave up power in 2009, said Koji Nakakita, professor of politics at Hitotsubashi University in Tokyo.
Nakakita said the DPJ may strip Noda of his premiership when it holds its leadership election in September in a desperate bid to regain public support before going to the voters.