Acknowledging global concerns over the "haphazard" management of the crisis by Tokyo Electric Power (TEPCO), Prime Minister Shinzo Abe said his administration will step in with public money to get the job done.
"The government needs to resolve the problem by standing at the forefront," he told a meeting of his nuclear disaster response team.
"Discarding the current, impromptu response, we will set up our basic policies for a fundamental resolution of the contaminated water problem.
The intervention comes just days before a decision in Argentina by the International Olympic Committee on who should host the 2020 Games. Observers have warned the situation at Fukushima could prove the undoing of Tokyo's bid.
"The world is paying attention to whether we can realise the decommissioning of Fukushima Daiichi, including the contaminated water problem," Abe said.
Thousands of tonnes of radioactive water are being stored in temporary tanks at the site, 220 kilometres (135 miles) north of the Japanese capital, much of it having been used to cool molten reactors wrecked by the tsunami of March 2011.
Some of the highly toxic water that has escaped may have made its way into the Pacific Ocean, TEPCO has admitted.
On top of this, the natural flow of groundwater from the surrounding hillsides, which goes underneath the plant and out to sea, is also causing problems.
As it pours through the soil it is mixing with polluted fluid that has seeped into the ground under the reactors.
Under the 47 billion yen (USD 470 million) scheme announced today, scientists will freeze the soil around the stricken reactors to form an impenetrable wall they hope will direct groundwater away from the plant.
This will entail burying pipes vertically and passing refrigerant through them. Officials estimate the whole project will cost around 32 billion yen.
The government hopes this ice wall will be operational by March 2015, with a feasibility study already under way, Kyodo reported.
A further 15 billion yen will be spent on equipment to remove radiation from water currently being stored.
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