UPDATE 2-Japan to spend nearly $500 mln to fix Fukushima nuclear crisis
* Japan to spend nearly 50 bln yen at Fukushima plant
* Government rushes to respond before Olympic decision
* Measures address only tiny slice of Fukushima crisis
* To build frozen earth wall around stricken reactors ...
* ... And improve water treatment systems
TOKYO, Sept 3 (Reuters) - Japan pledged nearly $500 million to contain leaks and decontaminate radioactive water from the tsunami-crippled Fukushima nuclear plant, as the government stepped up its intervention in the worst atomic disaster in a quarter century.
The announcement comes just days before the International Olympics Committee decides whether Tokyo - 230 km (140 miles) from the wrecked plant - will host the 2020 Olympics and the government is keen to show the crisis is under control. Madrid and Istanbul are the rival candidates.
"The world is watching to see if we can carry out the decommissioning of the Fukushima nuclear power plant, including addressing the contaminated water issues," Prime Minister Shinzo Abe told cabinet ministers, who met to approve the plan.
The government intervention represents only a tiny slice of the response to the Fukushima crisis triggered by the March 2011 earthquake and tsunami, which caused reactor meltdowns at the plant. The clean-up, including decommissioning the ruined reactors, will take decades and rely on unproven technology.
The measures do not address the full problem of water management at the plant, leave the fate of Fukushima operator Tokyo Electric Power Co (Tepco) unclear, and do not address the bigger problem of decommissioning. The sensitive job of removing spent fuel rods is to start in the coming months.
Nor do they clarify who will eventually foot the bill.
"This is a matter of public safety, so the country has to take the lead on this issue and respond as quickly as possible. Figuring out who to bill for the costs can come later," Economics Minister Akira Amari told a news conference.
Chief Cabinet Secretary Yoshihide Suga told a separate news conference that the government would spend a total of 47 billion yen ($473.05 million), including 21 billion yen in emergency reserve funds from this year's budget.
Of that, 32 billion yen will fund the building of a massive underground wall of frozen earth around the damaged reactors to contain groundwater flows, and 15 billion yen to improve a water treatment system meant to drastically reduce radiation levels in the contaminated water.
Tepco, Japan's biggest utility, has come under growing criticism following a stream of bad news including its admission - after repeated denials - that contaminated water was flowing into the Pacific Ocean. That was followed by leaks from above-ground tanks used to store contaminated water.
"Tokyo Electric has been playing a game of whack-a-mole with problems at the site," Trade and Economy Minister Toshimitsu Motegi said in a televised interview late on Monday, referring to a popular amusement park game.
After a recent spike in overseas alarm at the problems at Fukushima, the Japanese government is "trying to cool the international media off prior to the Olympics decision", Mycle Schneider, an independent nuclear energy analyst based in Paris who frequently visits Japan, said by email.
"At a moment when international public opinion is worrying about the long-term consequences of repeated leaks at the site, Tokyo seems to obeying the short-term logic of waiting until the Olympics decision is over. A more sustainable option might be to come out now, in Olympic spirit, with a strong decision about open, welcoming arms for international support to confront the unprecedented challenges of stabilizing the site," Schneider said.
"The government felt that we want to be fully involved and put together fundamental measures regardless of the decision on where they will hold the (Olympic) games," Motegi said, when asked if the moves were prompted by the pending Olympic decision.
Measurable radiation from water leaking from the facility is confined to the harbour around the plant, Motegi noted, and there should be no impact on other countries because the radiation will be so diluted by the sea that it is not an environmental threat.
The closest towns to the plant remain deserted and off-limits to the public. But some former residents have started to return to their homes, some of which are less than 20 kms away, as decontamination work progresses.
China said last month it was "shocked" to hear that contaminated water was still leaking from storage tanks and urged Japan to give timely and accurate information.
Tepco is storing enough contaminated water to fill more than 130 Olympic-sized swimming pools, mostly in hastily built tanks that officials have said may spring further leaks.
The planned measures are daunting. Freezing earth to block water flows is a technology commonly used in digging subway tunnels, but it is untested on the Fukushima scale and the planned duration of years or decades. The decontamination technology has repeatedly suffered from glitches.
Tepco said earlier that patrolling workers had found a new area of high radiation near water storage tanks. Workers had found no signs of fresh radiation leaks, but the company said a radiation reading on the ground near the newly found hot spot would expose a worker in just one hour to the safety limit Japan has set for exposure over five years.
No precise reading was given since workers were using instruments that only recorded radiation up to 100 millisieverts an hour. Tepco said the reading exceeded that level. Tepco said last week radiation near a different tank spiked 18 times higher than the initial reading, a level that could kill an unprotected person in four hours.