Japan's government approves compensation scheme for Fukushima plant operator

The plant operator’s payouts are expected to run into the tens of billions of dollars over the Fukushima nuclear plant breakdown. Tepco, Asia's largest power utility, appealed to government for aid in paying the compensation, in a bid to avoid bankruptcy.

But Trade Minister Banri Kaieda said the government's plan to help Tepco was not meant as a rescue of the utility, but as an attempt to minimise any increase in electricity costs and avoid rolling power blackouts this summer.

"This scheme will help alleviate concerns of financial market turmoil because holders of Tokyo Electric shares and bonds are protected," said Yasuhide Yajima, a senior economist at NLI Research Institute in Tokyo.

"I think we can avoid market turmoil because that's essentially the whole point of this scheme. But there is so much uncertainty over how this scheme will actually work because we don't know exactly how much the total costs for compensation will be," he added.

To make matters worse, the utility provider said on Thursday that damage to one of the plant’s reactors was worse than originally thought.

Tepco serves an area that accounts for 33% of Japan's economy.

Japanese media have reported that Tepco may have to raise electricity prices in order to help pay for payments.

A plan had been expected to be announced on Thursday, but was delayed due to disagreements. Tepco had earlier agreed to drastic restructuring in return for government help.

The conditions agreed by the company include massive cost-cutting, no upper limit for compensation payouts and accepting an investigation of its management.

The Fukushima plant was left severely damaged by the 11 March earthquake and subsequent tsunami.

More than 80,000 local residents living within a 20km (12 mile) radius of the plant have been evacuated from their homes.

Agriculture and businesses have been hit and there is no timescale yet for allowing residents to return.