Radiation levels around a crippled nuclear power plant have dropped, but a Japanese nuclear safety official says water inside a waste storage pool may be boiling. People living withing a 30-kilometre radius of the facility are being asked to remain indoors while monitoring continues.

Japanese Economy Ministry spokesperson Hidehiko Nishiyama told reporters on Tuesday that "we cannot deny the possibility of water boiling" in the Dai-ichi nuclear power plant's spent fuel storage pool.

If the water boils and evaporates, the spent fuel rods could become exposed. They are stored in containers designed to prevent them from resuming nuclear reactions, but officials acknowledged they may have been compromised, as have the walls of the storage pool.

But when pressed on the potential risk, Nishiyama skirted the issue.

"We have no information about whether the spent fuel rods are exposed," he said, telling reporters that the plant's operator is considering what to do about the situation.

The Dai-ichi plant -- which is one of three nuclear facilities that have declared emergencies in the aftermath of the magnitude 9.0 earthquake and ensuing tsunami that struck on March 11 -- has since suffered fires and a series of explosions.

The latest was early Tuesday, when a fire erupted at the fourth of the plant's six reactors.

While firefighters struggled to douse the blaze, Japan's top government spokesperson told reporters that the measurements taken at the gate of the Dai-ichi plant were less than 600 microsieverts per hour at 3:30 p.m. local time.

That was down from a high reading of nearly 12,000 less than 7 hours earlier.

The crisis is not over, and the government has ordered all 47 prefectures (provinces) to report the results of their environmental radiation observations every day, twice a day if possible.

"We have to monitor the situation closely, but the high concentration of radioactive material is not emitting constantly from the No. 4 reactor right now," Japan's Chief Cabinet Secretary Yukio Edano said.

Evacuation order remains in place

Earlier Tuesday Edano alerted the 140,000 people living within a 20- to 30-kilometre radius of the Dai-ichi plant to seek shelter. The facility is approximately 40 kilometres south of the hard-hit city of Sendai.

"Please do not go outside. Please stay indoors. Please close windows and make your homes airtight," Edano said in the first official warning that radiation posed a threat to human health since the quake struck.

"These are figures that potentially affect health. There is no mistake about that," he said, warning of the danger of more leaks after an explosion and fire at the plant sent radioactive material into the air, spreading fear and deepening the crisis gripping the earthquake and tsunami-ravaged country.

In the hours following the fire, there were reports of radiation levels reaching nine times higher than normal in Kanagawa prefecture near Tokyo which is some 270 kilometres to the south. Elevated levels were also recorded in the capital, but officials insisted there was no risk to the health of the city's population of 39 million people.
"The amount is extremely small, and it does not raise health concerns. It will not affect us," Tokyo government official Takayuki Fujiki said.

Following reports of the radiation emissions, the transportation ministry imposed a no-fly zone over 30 kilometre radius around the plant. Approximately 70,000 people living within 20 km of the plant had already been evacuated.

The explosion at the No. 2 reactor shortly after 6 a.m. local time Tuesday, was the third blast to rock the crippled plant in four days.

Representatives for Tokyo Electric Power said the explosion occurred near the suppression pool in the reactor's containment vessel, which is the last line of defence before radiation is released into the environment.

Company officials told reporters that pressure had fallen in the suppression pool, indicating that it had sustained some damage in the blast.

While firefighters were battling the blaze that broke out at the No. 4 reactor's spent fuel storage pond, Japanese Prime Minister Naoto Kan appeared on television to urge calm.

"I would like to ask the nation, although this incident is of great concern, I ask you to react very calmly," Kan said during his brief address.

Fifty workers remain at the power plant, locked in a struggle to stabilize the three reactors that have suffered explosions since the quake struck. Officials say they managed to extinguish the fire, but not before it released radiation "directly into the atmosphere".

"The Japanese authorities are saying that there is a possibility that the fire was caused by a hydrogen explosion," the United Nations International Atomic Energy Agency said in a statement.

50 workers remain at plant

Engineers have been pumping sea water into the Nos. 1, 2, and 3 reactors in an effort to keep them cool after the normal cooling systems were crippled in the quake.

But they have had difficulty keeping the nuclear fuel cells submerged, leading to dangerous heat levels. Failure to cool off the fuel cells could lead to a full meltdown, in which they melt through the reactor and release extremely dangerous levels of radiation.

The coolant water level dropped precipitously inside the Unit 3 reactor on Monday, leaving the uranium fuel rods completely exposed just hours after it was rocked by a hydrogen explosion that injured 11 workers. A similar hydrogen blast occurred Saturday at the No. 1 reactor, injuring four people.

Normally, the series of metal rods containing pellets of uranium fuel inside a nuclear reactor's core are kept cool with purified water that is pumped between the pipes. The resulting steam then drives an electricity-generating turbine, and the heat is then removed by coolant pumps.

But those pumps at the Fukushima plant, as well as its back-up power supply, were knocked out by the devastating earthquake and tsunami.

Norm Rubin, director of nuclear power research at Energy Probe, told CTV News that the Dai-ichi plant is almost 40 years old and had only been designed to withstand a quake of 6.5 magnitude.

"In hindsight, a few days after an 8.9 earthquake, that really seems like cutting corners … it seems nuts," he said.

Yukiya Amano, the head of the UN nuclear watchdog and a veteran Japanese diplomat, said Japan has now responded to the International Atomic Energy Agency's offer to assist with the crippled nuclear plants and said his staff are working "around the clock" to help.

"Japan and all our member states can be assured that all resources put at our disposal are fully mobilised. That will remain the case until this crisis has been resolved."

If there is a partial or total meltdown, it could become impossible to remove the fuel. That's what happened in 1979 at Three Mile Island, which remains sealed off to this day.

Woman rescued after 4 days

Despite the grim conditions, rescuers said Tuesday that they had found two survivors, including a 70-year-old woman who had been trapped when the tsunami struck her house in the northeastern Iwate prefecture.

And in a bid to lessen the nationwide impact of the disaster, Japan's central bank has injected a total of US$98 billion into the money markets. That follows a record US$184 billion cash injection by the Bank of Japan the day before, aimed at ensuring banks have the funds to continue lending money.

The benchmark Nikkei 225 stock index was nevertheless down for a second day, slumping as much as 14 per cent before closing the day's trading with a 10.6 per cent loss. The broader Topix was down 8 per cent.

The four hardest-hit prefectures in northeast Japan -- Iwate, Miyagi, Fukushima and Ibaraki -- account for approximately 6 per cent of the Japanese economy, but amidst the devastation and widespread power failures, industry throughout the region has been shuttered.

Ports are closed, steel plants are shut, oil refineries have halted production and a number of manufacturers including Toyota, Sony and Honda have all stopped work.

The effects are being felt far from the disaster zone too, with stores across the country experiencing a run on essential goods and long lines of cars crowding gas stations. And in the capital Tokyo, many of the trains that carry millions of commuters everyday have either gone out of service or are running on reduced shedules.

Japan is Asia's richest country, but its massive public debt at 200 per cent of gross domestic product is the biggest among industrialized nations.

With files from The Associated Press