Senior SDP official Seiji Mataichi said Saturday that it was natural for the party to leave the coalition.
The development comes after the Japanese Prime Minister Yukio Hatoyama dismissed the SDP chief from his cabinet for opposing his decision to keep the American base on Okinawa.
Hatoyama has abandoned his campaign promise to move the Marine Corps Air Station Futenma off the southern Japanese island, resulting in a dramatic drop in his approval rating to nearly 20 percent.
The airbase has been under US command since after World War II. More than half of some 47,000 US troops in Japan are stationed in Okinawa.
Islanders have for long been opposed to the presence of US military personnel, who are allegedly involved in crime, pollution, noise and accidents, on Okinawa.