TOKYO (Reuters) -- Former Japanese prime minister Ryutaro Hashimoto, an outspoken politician who jousted with U.S. officials over the auto trade and brought "Big Bang" financial reforms to Tokyo, died on Saturday at the age of 68.

Hashimoto, who retired from politics last September citing poor health, had undergone surgery to remove a large part of his intestine after being rushed to hospital on June 4, media said.

Hailed as a forceful leader who would tackle reform when he took over as premier in 1996, he ultimately faltered in the face of financial crisis, political scandal and economic stagnation.

By the time Hashimoto made a second run for the premiership in April 2001, losing out to reformist Junichiro Koizumi, he had become an emblem of the ruling party's resistance to change.

Hashimoto -- a dapper, quick-tempered politician who practiced kendo, the art of fencing with bamboo staves -- himself once had a reputation as a popular reformer.

After a high-profile term as trade minister during which he faced off against then-U.S. Trade Representative Mickey Kantor in a bitter feud over the auto trade, Hashimoto became head of a coalition government in January 1996.

A media favorite who stood out with his slicked-back hair, rakish suits and ever-present cigarette, he was welcomed abroad as a take-charge executive.

Vowing to "go down in flames" if he failed to carry out economic and other reforms that would carry Japan into the next century, Hashimoto led the LDP through October 1996 elections.

The party failed to win a majority by a slim margin, but the poll set the stage for the LDP's first return to power outside a coalition after being booted out by disgruntled voters in 1993.

Hashimoto then unveiled a "Big Bang" reform package to open up Japan's financial sector by 2001, a program which even his critics said was largely a success.

He also initiated an overhaul of the government aimed at boosting efficiency and giving the prime minister more power -- reforms Koizumi later mobilized in his own push for change. -------------------- Lone-wolf image

Despite his lone-wolf image and reputation as a policy expert, "Hashiryu", as he was popularly known, relied heavily on bureaucrats to help craft his policy agenda.

His self-styled "cabinet for a new age" was slammed for being made up of party elders, with posts allotted by seniority and LDP factional dynamics, casting doubt on his commitment to change.

The launch of that cabinet coincided with money-for-favors scandals at the health and trade ministries.

A year later he came under fire for selecting Koko Sato, found guilty in the 1970s Lockheed bribery scandal, to serve as a minister. A public outcry forced Sato to resign after one week.

That blow was followed by banking woes, bribery scandals and Japan's worst recession since World War Two -- triggered in part by Hashimoto's promised fiscal tightening in 1997.

Voters gave the LDP a drubbing in upper house elections in July 1998 and Hashimoto was forced to step down.

That wasn't Hashimoto's first taste of defeat.

Appointed finance minister in 1989, he had to resign two years later to take the blame for his ministry's failure to prevent a string of financial scandals.

Hashimoto also angered Japan's Asian neighbors when, on his 59th birthday, he paid a visit to Tokyo's Yasukuni Shrine, where World War Two leaders convicted as war criminals by an Allied tribunal are honoured along with the nation's war dead.

First elected to parliament's lower house in 1963, Hashimoto had also served as chairman of the Japan War-Bereaved Families Association. The powerful veterans' lobby was instrumental in watering down parliament's 1995 apology for Japan's wartime aggression to mark the 50th anniversary of the war's end.

His rival Koizumi has similarly outraged China and South Korea with his annual visits to Yasukuni after he defeated Hashimoto to become prime minister in 2001.

Hashimoto in recent years became a critic of Koizumi's Yasukuni visits and joined a group of Japanese lawmakers last March to visit China to meet with President Hu Jintao.

Koizumi's rise to power was a big blow to the once-powerful LDP faction led by Hashimoto, which the prime minister dubbed "resistance forces" for their opposition to many of his reforms -- including the often-wasteful public works spending that the long-ruling party had traditionally used to woo voters.