UPDATE 1-Japan vows quick action, public funds for Fukushima
* PM Abe vows 'all necessary measures' on Fukushima water crisis
* Govt to set out measures, including public funds, as soon as Tuesday
* Authorities stepping in as operator Tepco is overwhelmed
* New govt nuclear-decommissioning agency proposed
TOKYO, Sept 2 (Reuters) - Japan vowed quick, decisive action, including the use of public funds, to tackle the worsening problem of contaminated water pouring from the wrecked Fukushima nuclear plant, as the authorities step in to help the facility's embattled operator.
Prime Minister Shinzo Abe said the government "will step forward and implement all necessary policies" to deal with the flood of radioactive water from the plant, a legacy of the world's worst atomic disaster in a quarter century.
The government will present a "comprehensive package of measures" on the water problem as soon as Tuesday, a senior official said.
Tokyo's measures come amid proposals to create a government agency devoted to decommissioning the Fukushima plant and as some outside the government call for a break-up of the operator, Tokyo Electric Power Co, or Tepco.
Two and a half years after a massive earthquake and tsunami crippled the facility, the problem of contaminated water is only getting worse, and the government is taking a more direct role as Tepco appears overwhelmed by the task.
"The government has stayed in the background and extended support for Tokyo Electric's effort to tackle the problem of contaminated water. But we've now decided that Tokyo Electric's patchwork response has reached its limit, and the government needs to come forward and quickly respond, even by using budget reserves," Chief Cabinet Secretary Yoshihide Suga told reporters.
Tepco, rushing to contain the crisis from the steady accumulation of water used to cool melted fuel rods, said at the weekend that radiation near a tank holding highly contaminated water at the plant had spiked to 18 times the initial reading, a level that could kill an unprotected person in four hours.
This follows the utility's admission late last month, a reversal previous denials, that large amounts of contaminated water were flowing into the Pacific Ocean from the coastal facility 230 kms (140 miles) northeast of Tokyo.
Japan's nuclear industry, which once provided a third of the nation's power, has ground nearly to a halt since the quake hit the Fukushima plant in March 2011, causing reactor meltdowns. Restarting Japan's off-line reactors, and reducing the nation's reliance on foreign energy supplies, is a key element of Abe's economic growth plans and a pillar of Tepco's turnaround plan.
Japanese officials also fear that international attention to the Fukushima crisis could threaten Tokyo's bid to host the 2020 Olympics, a decision set to be made by the International Olympic Committee on Saturday in Buenos Aires.
The government will present a package of measures as soon as Tuesday to a taskforce dealing with the contaminated water problem, officials said. The steps will include using existing budgetary funds.
Japan's nuclear regulator reiterated on Monday that it may have to consider discharging water with radiation below regulatory limits into the ocean. Tepco has been pumping water over the wrecked reactors to keep them cool and storing the radioactive waste water as well as contaminated ground water in ever-growing numbers of above-ground tanks.
Nuclear Regulation Authority (NRA) Chairman Shunichi Tanaka told reporters there was no evidence of new water leaks at the Fukushima plant, following the discovery of high radiation levels in recent days.
Still, he said, "The people at the Fukushima plant have been dealing with the post-accident situation with haphazard, stop-gap measures for several years." Tanaka said the NRA has instructed plant officials to foresee possible risks and take action as quickly as possible to mitigate them.
More broadly, policymakers may be moving toward even greater intervention in the ongoing response to the nuclear disaster.
Yasuhisa Shiozaki, deputy policy chief of the ruling Liberal Democratic Party and head of its project team on nuclear regulation, called for the creation of a "decommissioning agency." He also urged the merging of the NRA with the Japan Nuclear Energy Safety Organisation, a body that provides engineering experts and inspects Japan's nuclear facilities.
Giving Tokyo direct oversight of Fukushima, a decommissioning agency could resemble Britain's National Decommissioning Authority, a public body charged with managing the dismantling of the nation's atomic power and research stations.
"It is an urgent task to promptly restructure our overall nuclear power policies under a resolute system and revive domestic and international trust," Shiozaki said in comments posted on his website.
Debate has also emerged over nationalizing or breaking up Tepco to put the Fukushima reactors directly under official control.
Tepco, Japan's largest utility, last year got a 1 trillion yen ($10.2 billion) injection of tax money in exchange for giving the government a de facto controlling stake, but management has been left to the company. The firm also receives public funds - in theory to be paid back - to help compensate residents forced to flee after the 2011 disaster.