"I would like to ask the nation, although this incident is of great concern, I ask you to react very calmly," Kan said during a brief televised address.
Radiation levels around the plant Tuesday were measured at 8,217 microsieverts an hour -- more than 7,000 above the legal limit.
Anyone less than 20 kilometres of the reactors was urged to leave the area, while anyone within 20 to 30 km was told to stay inside, close all windows and turn off any air conditioners.
Despite the radiation levels, 50 workers remain at the power plant, locked in a struggle to cool the damaged reactors and prevent any catastrophic meltdowns.
Slightly elevated radiation levels were also measured in Tokyo, 270 kilometres to the south, but not high enough to pose a health risk to the city's 39 million people.
The explosion caused further damage to the plant's Unit 2 reactor, while the fire broke out at Unit 4, which had escaped the same level of critical damage suffered by the other three reactors.
Firefighters were later able to extinguish the blaze. Reports said the fire started at a storage area for spent fuel.
Tuesday's explosion at Unit 2 was the third blast to hit the plant since a monstrous 9.0-magnitude earthquake struck near Japan's eastern coast, causing a tsunami that wiped out entire towns and is believed to have killed at least 10,000 people.
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 outside air.
Company officials told reporters that pressure had fallen in the suppression pool, indicating that it had sustained some damage in the blast.
Engineers have been pumping sea water into the reactors in an effort to keep them cool after the normal cooling systems were knocked out when the quake cut power to the plant.
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.
On Monday, the level of coolant water dropped precipitously inside the Unit 3 reactor, 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 Unit 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 back-up power supply, were knocked out by Friday's earthquake and tsunami.
The series of accidents that have followed the worst nuclear crisis since the 1986 Chernobyl disaster in Ukraine sparked criticism that authorities were ill-prepared.
Norm Rubin, director of nuclear power research at Energy Probe, said the engineers and staff at the plant "are scrambling and doing Hail Mary passes to try to keep the fuel rods inside those reactors cool enough that they don't run dry, fail and melt."
"That's the worst case scenario at this point," he told CTV News Channel Monday.
Rubin said as much as three-quarters of the 3.7-metre high bundles of nuclear fuel rods were completely exposed when the coolant leaked away, allowing them to heat to almost unimaginable temperatures.
"That's a serious no-no, because unless this material is cooled it is generating enough heat … an amazing amount of heat," he said. "And if you don't take that heat away the stuff that's producing the heat overheats: it just keeps getting hotter."
He added: "Something has to take this heat away or else things go very badly …
Rubin said that this is the first time so many reactors in one place have threatened to melt down at the same time, adding another layer of danger to the equation.
"This is uncharted territory … we've never been in a situation where more than one reactor is in crisis at the same time at the same facility. This is new."
Rubin said 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."
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.
Japanese officials have evacuated 180,000 people from the around the Dai-ishi plant in recent days. It is believed that as many as 190 people may have been exposed to elevated radiation levels.
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