Japan's Prime Minister Kishida Fumio says he decided to disband his faction in a bid to settle things in the wake of a political fund scandal involving such groups within the main ruling Liberal Democratic Party.

Kishida was speaking on Monday at a meeting of the LDP taskforce for political reform.

He stressed the importance of members of each faction coming up with ways to find a resolution and fulfill their responsibility to give an explanation about the allegations of failing to report revenue from fundraising events.

Kishida also said the taskforce must discuss the direction the LDP should head in, as well as rules to be set to prevent a recurrence.

The taskforce attendees then outlined proposals, in preparation for compiling an interim report as early as Thursday.

The proposals include the introduction of external auditing of factions' political fund reports, and also the punishment of lawmakers in the case of arrests and indictments of their chief treasurers.

The outline recommends that factions move toward true "policy groups." Under this recommendation, the party would prohibit the groups from holding fundraising parties, as well as from pushing for its preferences in the selections for Cabinet ministers, and other posts.

The taskforce plans to continue its discussions on Tuesday.