TOKYO, July 13: Prime Minister Ryutaro Hashimoto resigned today after his ruling Liberal Democratic Party's stunning defeat in elections dominated by voter anger over his failure to pull Japan out of its worst recession in decades.Hashimoto grimly conceded defeat and said he took responsibility for the party's winning just 44 seats out of the 126 contested half of parliament's upper house in yesterday's elections.``The defeat was my fault,'' he said after a meeting of party leaders approved his decision to resign.Party leaders have already begun discussing who would replace Hashimoto. Foreign minister Keizo Obuchi and former chief cabinet secretary Seiroku Kajiyama were seen as the most likely successors. Hashimoto will stay in office until a successor is chosen.Hashimoto's resignation would likely confuse Japan's efforts to pull itself out of its worst recession since World War II, and concerns over a leadership change sent share prices plunging early today.The 225-issue benchmark Nikkei stockaverage fell 217.48 points, or 1.35 per cent, to 15,872.58 points in the first 30 minutes of trading. It regained most of the losses later on profit-taking.The dollar, meanwhile, soared in early trading to 144.06 yen, up 2.73 yen from 141.33 yen late Friday in Tokyo and above 140.93 yen in late New York trading Friday.``We must fix the economy as soon as possible'' said Takashi Imai, head of the powerful Japan Federation of Economic Organisations. We cannot afford to have a political vacuum.''The Liberal Democrats' performance fell far short of the 69 seats they needed to regain a majority in the chamber, which it lost in 1989, and also was well below its strength going into the polls of 61.They now have 102 in the 252-seat upper house. Voters vented their frustration at the LDP's inability to get the economy back on track. Unemployment is at a record high, bankruptcies are swelling and Japan's financial system is wobbling under massive bad loans. The conservative, pro-business liberal democratswill continue to rule because they have firm control over the more powerful lower house, which can pass the national budget and choose the prime minister without the approval of the upper house.The party will need the cooperation of other parties to pass key legislations, however.Seiroku Kajiyama tipped as new premierVeteran politician Seiroku Kajiyama was Monday tipped as the dark horse in Japan's search for a new premeir after the expected resignation of Ryutaro Hashimoto. The 72-year-old former chief cabinet secretary has strong support within the party although he is regarded as a liability by the financial markets. Foreign minister Keizo Obuchi, is regarded as the obvious candidate but if the whole cabinet resigns, as some analysts predict, he is unlikely to emerge as premier.That would push Kajiyama to the fore. He is a solid supporter of public works projects, a typical LDP policy to secure support from the construction industry. But in stark contradiction to all established economictheory, Kajiyama has also suggested raising interest rates would help pull Japan out of its worst post-war recession.