Abe's administration has been pushing to restart nuclear plants more than three years after the devastating Fukushima disaster. As the head of the powerful trade and industry ministry, Miyazawa will be in charge of key decisions on energy policy and the reopening of idled reactors across Japan.
Miyazawa, 64, said he learned from news reports of the 18,230 yen ($170) that the support group spent at the sadomasochism-themed bar in his political district of Hiroshima.
"There's no way we can classify expenditure at such a place as political spending. I think it was handled inappropriately,"Miyazawa said during a group interview with Reuters on Thursday. He called the incident "embarrassing" and said he did not go to the bar himself.
Kyodo News said the support group Miyazawa-kai had made the payment on Sept. 6, 2010, labelled "entertainment expense", according to a political finances report.
Abe's first term between 2006 and 2007 was marred by a string of resignations, a pension records scandal, and a minister's suicide that eroded his support. Eventually, he quit in the face of parliamentary deadlock and ill-health.
Miyazawa also admitted on Thursday to owning shares in the de facto nationalized Tokyo Electric Power Co, the operator of the destroyed Fukushima plant that the trade ministry oversees.
While it is not illegal for him to hold such shares, it is customary in Japan for politicians to divest them when assuming a cabinet post.
Miyazawa's holding of 600 Tokyo Electric shares is worth more than $1,800, based on the utility's current stock price.
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Atsuo Ito, an independent political analyst, said the revelation about the shares would be a distraction for a government already grappling with tough decisions.
"Even if it doesn't lead to his resignation, it takes energy away from the administration's difficult policies, such as raising the sales tax and restarting nuclear reactors," Ito said.
"The ruling party wants to avoid further resignations. But this could be a repeat of the first Abe administration that was heavily criticized by the public when he defended his ministers for a long time, even after scandals."
Chief Cabinet Secretary Yoshihide Suga told a news conference he had heard from Miyazawa over the bar bill, saying the minister would deal with the problem appropriately.
In the interview, held at his new office in the ministry, Miyazawa said he would not sell his shares in the beleaguered utility, instead choosing to put them in a trust.
"Honestly I did consider selling them, but I thought it was my responsibility as a politician to hold them (shares) as we are in a situation where we have to deal with compensation, decommission and contaminated water issues."
Koichi Nakano, a professor at Sophia University and a frequent critic of Abe's government, said revelations about Miyazawa's ownership of Tepco shares were more troubling.
"It damages his credibility as the minister in charge of (reactor) restarts."
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