Japanese Prime Minister Naoto Kan has said his government is in a state of maximum alert over the crippled Fukushima nuclear plant.
Plutonium has been detected in soil at the facility and highly radioactive water has leaked from a reactor building.
Officials say the priority remains injecting water to cool the fuel rods.
Mr Kan told parliament the situation at the quake-hit plant "continues to be unpredictable".
The government "will tackle the problem while in a state of maximum alert", he said, adding that he was seeking advice on whether to extend the evacuation zone around the plant.
Meanwhile National Strategy Minister Koichiro Gemba said the government could consider temporarily nationalising Tepco, the company running the plant.
On Monday shares in the company dropped to their lowest level in three decades.
'Utmost efforts'
Chief Cabinet Secretary Yukio Edano, in another press briefing, described the situation at Fukushima as "very grave".
Workers are battling to restore power and restart the cooling systems at the stricken nuclear plant, which was hit by a powerful quake and subsequent tsunami over two weeks ago.
The twin disasters are now known to have killed 10,901 people, with more than 17,000 people still missing across a swathe of northern Japan.
"We are doing our utmost efforts to contain the damage," Mr Edano said.
"We need to avoid the fuel rods from heating up and drying up. Continuing the cooling is unavoidable... We need to prioritise injecting water."
But he said work to safely remove contaminated water was also a priority.
On Monday highly radioactive water was found for the first time outside one of the reactor buildings at Fukushima plant.
The leak in a tunnel linked to the No 2 reactor has raised fears of radioactive liquid seeping into the environment.
Plutonium - used in the fuel mix for one of the six reactors - has also been found in soil at the plant, but not at levels that threaten human health, officials say.
Correspondents say the government has been accused of indecision and delay in tackling the crisis.
Tepco, meanwhile, was criticised by the government after issuing incorrect radiation readings.
On Sunday it said radiation levels at reactor No 2 were 10 million times higher than normal, before correcting that figure to 100,000 - something the government called "absolutely unacceptable".
It has also been accused of a lack of transparency and failing to provide information more promptly.
Regional fallout
Officials in China, South Korea and the United States say they have recorded traces of radioactive material in the air.
The US Environmental Protection Agency said it had detected traces of radiation in rain water in the north-east of the country.
It said these were consistent with the Fukushima nuclear accident and also said they did not constitute a health hazard.
China's Ministry of Environmental Protection has said that "extremely low-level" doses of iodine-131, a radioactive material, have been found in coastal areas including Jiangsu, Shanghai, Zhejiang, Anhui, Guangdong and Guangxi.
It had already reported traces of the radioactive material in the air above the northeastern province of Heilongjiang.
However, the doses were so small as to not pose a threat to public health and no measures against it were necessary, the agency statement said.
Water and food is being tested for radiation; bans on some imported Japanese foodstuffs remain in place.
In Vietnam, the Thanh Nien newspaper has reported that Vietnamese scientists have found small amounts of radiation in the air.
The Korea Institute of Nuclear Safety said it had detected traces of iodine-131 in Seoul and seven other places across South Korea.
However, an agriculture ministry official told AFP that "no trace of radiation has been found so far either in our own fish or those imported from Japan".
