The political uncertainty could cast doubt on Ishiba's leadership before an upper house election set for July, and comes at a time when Japan's economy faces headwinds from the escalating trade war waged by US President Donald Trump.
Speaking in parliament, Ishiba said he used "pocket money" to hand out gift certificates to 15 MPs of the Liberal Democratic Party (LDP) before having dinner with them on March 3 as a "show of appreciation" for their hard work getting elected.
Domestic media reported on Thursday that Ishiba handed gift certificates worth 100,000 yen ($A1000) each to the MPs.
When asked by reporters later on Thursday whether he might step down, Ishiba said only that the gifts did not violate the law, according to the Nikkei newspaper.
"My action caused distrust and anger among many people, for which I deeply apologise," Ishiba told parliament on Friday in response to a question by a ruling-party MP.
While Ishiba said the move was not illegal because it was a personal gift with no political intentions, it drew criticism even from within the LDP's coalition partner and calls from some opposition parties for him to resign.
The gift issue adds to challenges for Ishiba's minority coalition, which has been forced to make rare amendments to the government's budget plan for the financial year beginning in April to appease opposition parties and ensure its passage through parliament by the March 31 deadline.
Tetsushi Sakamoto, chair of the LDP's diet affairs committee, said on Friday the gift issue could dampen prospects for passing the budget by the end of March, Kyodo news agency reported.
Japan will hold an election about July for the upper house, where the ruling coalition's slim majority could also be at risk if Ishiba cannot revive public trust roiled by a previous political issues over unrecorded donations to lawmakers.
A poll by public broadcaster NHK last week showed the Ishiba administration's approval rating stood at 36 per cent, down from 44 per cent in February.
