Koizumi acted to end a dispute foiling budget deliberations, which was fueled by a political tussle between Foreign Minister Makiko Tanaka and Vice Foreign Minister Yoshiji Nogami, a bureaucrat, over whether a powerful Diet member had used pressure to keep two Japanese non-governmental organizations from being invited to last week's conference in Tokyo on rebuilding Afghanistan.
Nogami was also sacked, and the politician in the center of their dispute, Muneo Suzuki, announced his intention to quit Tuesday.
Tanaka's and Nogami's contrasting remarks on the issue in the Diet sparked an attack by opposition party members Monday and Tuesday over the NGO affair and a boycott of Diet sessions, making passage of a supplementary budget bill difficult for the government.
The brouhaha broke out when Tanaka said Nogami had told her Suzuki, a member of the ruling Liberal Democratic Party, pressured the ministry to keep the two NGOs out of the conference. Nogami disputed Tanaka's version, and Suzuki called Tanaka a liar.
"The priority is to resume Diet proceedings without further disruptions," Koizumi told a news conference early Wednesday. He said the decision would pave the way for the government to concentrate on passing budget plans.
Popular with the people, but often at odds with Foreign Ministry bureaucrats and other Diet members, Tanaka, 57, was Japan's first female foreign minister, and the daughter of the late Prime Minister Kakuei Tanaka.
"The prime minister summoned me as I was heading home," Tanaka told reporters as she was leaving the prime minister's residence shortly after 1 a.m. Wednesday. "And I was asked to leave my fate in his hands, as it is necessary to secure Diet passage of the budget."
"When I asked him if he wanted to fire me, he said, 'Yes.' I thanked him for allowing me to serve for such a long time."
Independent, outspoken Tanaka never did get along with the bureaucrats in her ministry, and they regularly leaked stories to the media about her problems keeping appointments on time and her diplomatic miscues.
Koizumi did not name a new foreign minister, but media reports suggested that Sadako Ogata, former head of the U.N. High Commissioner for Refugees, would be a strong contender for the post, having successfully handled last week's Afghan conference.
Tanaka, the daughter of a former Japanese premier who scored high marks in public-opinion polls, was appointed to the post last April when Koizumi took charge of the country and the ruling Liberal Democratic Party.
Early Wednesday morning, Koizumi told reporters, "I had to bring the situation under control, adding, "We're sorry that disputes in the government have disrupted Diet proceedings." He was also understood to be concerned about Japan's diplomatic efforts in the wake of Tanaka's problems with the ministry staff. He acknowledged his responsibility for naming Tanaka to the Cabinet.
She was the first Cabinet member to leave in a Koizumi government that took office in April.
Koizumi has faced criticism for his handling of the situation.
Problems bubbled up Friday, when the prime minister said, "Tears are womens' greatest weapons. When women cry, men cannot compete with them." He made the statement after Tanaka appeared to cry during a Diet session in the face of accusations that she was lying.
His remarks landed him in hot water with a group of female opposition Diet members who demanded Tuesday that he retract his statement.
For her part, Tanaka's sharp tongue landed her in trouble with the Liberal Democratic Party last year. She was disciplined when she said of the late Prime Minister Keizo Obuchi, "He properly said he's the 'king of debt' -- that is why he is a dead duck and deserves to be."
Her problems in office included being late for appointments with visiting dignitaries and missing a meeting with U.S. Assistant Secretary of State Richard Armitage in Tokyo. She had to apologize to the United States for revealing to reporters the secret location of State Department officials shortly after the Sept. 11 terrorist attacks.
She also was frustrated with Foreign Ministry bureaucrats who have tried to block her personnel changes and ambassadorial appointments. She was upset because the bureaucrats have been slow to clean up the ministry after a series of scandals that have become an international embarrassment.
(With reporting by Motoko Naito in Tokyo.)