Japan's government on Tuesday approved a long-sought plan to open up its power industry after the 2011 Fukushima nuclear disaster renewed calls for more competition in the sector.

The reforms, which still need approval from parliament, would be the first major overhaul of Japan's power industry since the early 1950s when regional utilities were established across the island nation.

Since then, the sector has been effectively monopolised by 10 regional firms which are engaged in power generation, distribution and retail sales.

The cabinet Tuesday approved a scheme presented by an expert panel which called for the utilities to be split among their various business lines, with all restrictions on pricing to be eliminated by 2018 at the earliest.

Opening up Japan's power grid to new competition would ultimately benefit industrial and individual consumers, said economy and industry minister Toshimitsu Motegi.

"These reforms concern the whole industry, ranging from upstream procurement and power generation to downstream retail and consumption," he said.

"The demand side will have more options, which will lead to lower electricity prices," he was quoted by Japanese media as saying.

The country has been hit by soaring energy import costs since shutting down its nuclear reactors following the atomic crisis two years ago.

Fukushima power plant operator TEPCO was forced to raise its electricity rates for millions of customers to help meet massive compensation and clean-up costs.

-- Dow Jones Newswires contributed to this report --