It is the eighth fire to occur since the nuclear plant, the world's largest, was closed after being damaged by an earthquake in July 2007.

Tepco 'warned'

Kashiwazaki City's fire department warned Tepco twice late last year to step up fire prevention at the plant.

The Nuclear and Industrial Safety Agency, which works under Japan's trade ministry,  on Thursday instructed Tepco to report on preventive measures it will take to avoid other such incidents.

The incident comes after Tepco, the largest power producer in Asia, sought permission to restart the number seven generator at the quake-hit Kashiwazaki-Kariwa plant.

Despite receiving central government approval last month, Tepco still needs approval from three local authorities: Niigata Prefecture, the city of Kashiwazaki, and the village of Kariwa - in order to restart the generator.

Restart 'likely'

Tepco is likely to get the go-ahead from the local governments for the number seven unit to restart by March 14, according to Hirofumi Kawachi, a senior analyst at Mizuho Investors Securities.

Tepco was warned twice last year to step up fire prevention at the plant
"Because they evaluate the safety of each generator separately, [the fire] is unlikely to cast any particular damper on the number seven unit restart," Kawachi said.

Tepco has declined comment on when the plant may resume operations.

Civic groups opposing a restart of the generator submitted a petition with up to 600,000 signatures to Tepco last month, the company said.

Japan is a heavy user of nuclear energy and the firm's Kashiwazaki-Kariwa plant was meant to answer more than 3% of the nation's energy needs.

But the government - under pressure from the International Energy Agency to examine the plant - has demanded it should be closed until it is proved that safety requirements can be met.

Continued purchase of substitute sources of energy including expensive oil and coal are expected to add to the firm's costs.