Japanese Prime Minister Naoto Kan has said his government is in a state of maximum alert over the crippled Fukushima nuclear plant.
Plutonium was detected in soil at the facility and highly radioactive water had leaked from a reactor building. Officials in China, South Korea and the United States have recorded traces of radioactive material in the air.
Earlier, Japan's government strongly criticised the plant's operator, Tepco, over mistaken radiation readings.
Mr Kan told parliament the situation "continues to be unpredictable".
The government "will tackle the problem while in a state of maximum alert," he said.
'Very grave' Speaking on Tuesday about how the government might fund relief and recovery efforts, Mr Kan said: "We need to pursue various possibilities."
Scrapping a planned cut in corporate taxes was one option under consideration, he added.
Chief Cabinet Secretary Yukio Edano said: "The situation is very grave."
"We are doing our utmost efforts to contain the damage.
"We need to avoid the fuel rods from heating up and drying up. Continuing the cooling is unavoidable... We need to prioritise injecting water," he said.
Correspondents say the government has been accused of indecision and delay.
Regional fallout
The Environmental Protection Agency in the United States 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".
FUKUSHIMA UPDATE (28 MAR)
- Reactor 1: Damage to the core from cooling problems. Building holed by gas explosion. Highly radioactive water detected in reactor
- Reactor 2: Damage to the core from cooling problems. Building holed by gas blast; containment damage suspected. Highly radioactive water detected in reactor and adjoining tunnel
- Reactor 3: Damage to the core from cooling problems. Building holed by gas blast; containment damage possible. Spent fuel pond partly refilled with water after running low. Highly radioactive water detected in reactor
- Reactor 4: Reactor shut down prior to quake. Fires and explosion in spent fuel pond; water level partly restored
- Reactors 5 & 6: Reactors shut down. Temperature of spent fuel pools now lowered after rising high
Highly radioactive water has been 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 has also been found in soil at the plant, but not at levels that threaten human health, officials say.
Tepco later said that plutonium had also been detected in soil at five locations at the plant but not at levels that represented a risk to human health.
It said the results came from samples taken a week ago and would not stop work at the plant.
Plutonium was used in the fuel mix for only one of the six reactors, No 3.
On Sunday ,Tepco said radiation levels at reactor No 2 were 10 million times higher than normal, before correcting that figure to 100,000.
"Considering the fact that the monitoring of radioactivity is a major condition to ensure safety, this kind of mistake is absolutely unacceptable," said Mr Edano.
Tepco has been criticised for a lack of transparency and failing to provide information more promptly and for making a number of mistakes, including worker clothing.
Workers are battling to restore power and restart the cooling systems at the stricken nuclear plant, which was hit by a quake and tsunami over two weeks ago.
A 9.0-magnitude earthquake on 11 March and the powerful tsunami it triggered is now known to have killed 10,901 people, with more than 17,000 people still missing.
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