Japan's Tokyo Electric Power Co. ( TEPCO) started testing a new system on Tuesday to process highly radioactive water, prior to full implementation of the system at the troubled Fukushima No. 1 power plant on Friday.

The TEPCO said the new treatment system, which can absorb cesium from large volumes of radioactive water, will allow the water to be recycled and used for key cooling functions in its crippled reactors that were critically damaged by the March 11 quake and tsunami.

The new treatment system, which comprises components from the United States and France, will process around 1,200 tons of highly radioactive water per day, according to the company.

The company is struggling to contain more than 105,000 tons of highly radioactive water at the No. 1 facility located 220 kilometers northeast of Tokyo and has said that it may run out of space to store it in about two weeks.

The contaminated water has already leaked into seafront pits, tunnels, service trenches and shafts connected to the reactors. TEPCO said the new treatment system is integral to bring the nuclear crisis under control and to prevent further radioactive material from leaking into the ground, sea and air.

The nuclear crisis, the worst since the 1986 Chernobyl catastrophe, has led to the evacuation of thousands of residents from the vicinity of the radiation-leaking plant and has had an untold affect on local businesses including agriculture, farming, and fishing industries.

As TEPCO is facing monumental compensation payments, the government on Tuesday approved a bill to assist the company in making its payments whilst preventing the company from going under.

The bill, once ratified, will see the creation of an entity that will allow the firm to draw on state-supported funds to make compensation payments and safeguard the country against a loss of power supply.

Banri Kaieda,Japan's Minister of Economy, Trade and Industry, said the new scheme will call on other electricity firms using nuclear power to also contribute to the financial entity under an industry banner of mutual help, with TEPCO to repay the funds covered by the body.

Kaida said however that the government will do its utmost to ensure that the scheme doesn't lead to other utility firms passing on their costs to consumers through higher electricity charges.

Swift approval of the new bill may be dependent on Prime Minister Naoto Kan specifying exactly when he plans to step down as prime minister and leader of the ruling Democratic Party of Japan to ensure opposition parties' cooperation in a divided parliament.