Japan's government decided Friday to set up a fund to help pay damages stemming from the crisis at a tsunami-crippled nuclear plant, financed by public money and mandatory contributions from utility companies.

Tokyo Electric Power Co. expects a deluge of damage claims from those affected by the radiation-leaking Fukushima Dai-ichi nuclear plant on the northeastern coast, whose problems constitute the worst nuclear accident since Chornobyl in 1986. However, the utility is not expected to be able to pay all of them.

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Workers wearing protective suits check the status of the water level indicator at the fuel area inside Tokyo Electric Power Co.'s crippled Fukushima Daiichi Nuclear Power Plant No.1 reactor on Tuesday. ((Tokyo Electric Power Co/Reuters))

The government's plan, which would spread the burden for the crisis, must be referred to parliament for its expected approval. The plan would create an entity that collects money for compensation from TEPCO and other utilities that operate nuclear power plants. The government would issue the body special bonds that could be cashed when needed to pay claims.

TEPCO earlier this week agreed to a cost-cutting reorganization as part of the government's compensation plan, which also would set up a commission to monitor the company's management.

Economy and Trade Minister Banri Kaieda insisted earlier this week that the compensation plan was not a bailout for TEPCO, but rather a way to ensure victims get paid.

"We want to avoid big changes in the electricity bills and contain (the public burden) as much as possible," Kaieda said Friday.

Agency says 'meltdown'

Japan's Nuclear Industrial and Safety Agency acknowledged for the first time Friday that what happened at one of the Fukushima Daiichi nuclear reactors constituted a "meltdown" under the Japanese definition.

Agency spokesman Hidehiko Nishiyama was speaking the day after new data showed the water level in the core of Unit 1 was much lower than expected, fully exposing what was left of the fuel rods that had partially melted in the hours and days immediately following the March tsunami.

The findings indicate that melted fuel also had fallen to a lump in the bottom of the pressure chamber and may have even slipped into the larger beaker-shaped drywell, or containment vessel.

The Japanese definition of a meltdown requires melted fuel to drop to the bottom of the core.

"Meltdown" is not a scientific term and the definitions for it vary, though generally a "partial meltdown" refers to the melting of fuel rods, as has been known to have happened at Fukushima for some time. A "complete meltdown" can mean the pressure vessel and other containments have been breached.

Japanese officials stressed that the fuel melted early on in the crisis and posed no danger now.

TEPCO president Masataka Shimizu said he expects the plan to go into effect soon.

"Under this support scheme, while receiving support from the government, we will prepare to compensate those who are suffering in a fair and prompt manner," he said in a statement.

Shinichi Ichikawa, the director of equity research at Credit Suisse in Tokyo, said the plan needed to achieve three goals: maintain a stable electricity supply, ease concerns of financial markets and ensure victims of the nuclear disaster would be compensated.

"It looks like it's a good solution," he said.

TEPCO has sought a $23.92 billion Cdn loan to tide it through the initial emergency period. It also expects to pay $598 million Cdn in initial compensation to nearly 80,000 residents evacuated from around the radiation-leaking plant, which was hit by a giant tsunami after Japan's massive March 11 earthquake. Overall damages are expected to be much higher.

Also Friday, the operator of a nuclear plant in central Japan began suspending operations at its reactors while it strengthens tsunami protections, under a separate agreement with the government.

The crisis at Fukushima had prompted the government to evaluate all of Japan's 54 reactors for quake and tsunami vulnerability.

That assessment led to Prime Minister Naoto Kan to request a temporary shutdown at the Hamaoka plant in Shizuoka prefecture amid concerns an earthquake with a magnitude of 8 or higher could strike central Japan sometime within 30 years. The Hamaoka facility sits above a major fault line and has long been considered Japan's riskiest nuclear power plant.

Chubu Electric Power Co., which supplies electricity to central Japan, including the city of Toyota, where the automaker is based, said steps to idle the No. 4 reactor at the Hamaoka plant started Friday morning. The company expects to begin halting the No. 5 reactor, its second operational reactor, on Saturday.

Nuclear energy provides more than one-third of Japan's electricity, and shutting the Hamaoka plant is likely to exacerbate power shortages expected this summer. Its reactors account for more than 10 per cent of Chubu's power supply.