Japan's cabinet approved a scheme on Tuesday to help Tokyo Electric Power Co compensate those affected by the radiation crisis at its stricken nuclear plant, a step forward in a slow-moving process that has frustrated not only the victims but also investors.

The news sent shares in the utility, known as Tepco, higher in early trading, with a glut of buying seen just after the announcement. Other Japanese utilities' shares also rose.

It remains uncertain when, or even if, the scheme will be enacted into law, given the shaky political landscape under lame-duck Prime Minister Naoto Kan, who has been unable to push through several disaster-related bills in a divided parliament.

The decision comes three months after a massive earthquake and tsunami disabled reactor cooling systems and triggered meltdowns at Tepco's Fukushima Daiichi nuclear plant and one month since the government unveiled its framework.

Trade Minister Banri Kaieda, whose ministry regulates Tepco and other power utilities, said the government aimed to submit the compensation bill to parliament as soon as possible. He also ruled out approving a hike in electricity charges by the utility to finance compensation payments, saying Tepco must sell assets to minimize tariff increases.

The scheme was designed to restore market confidence by keeping Asia's largest utility solvent in the face of massive compensation claims.

It seemed to have had some effect in early Tuesday trading, with Tepco shares jumping 10 percent at the opening.

Under the plan, a fund will be set up to help Tepco compensate people affected by the radiation crisis, which has forced thousands of people to be evacuated from around the Fukushima plant and enable the regional power monopoly to stay in business.

The country's other nuclear power operators will be required to make annual contributions to the fund and the government will also inject money into it if needed. Tepco will pay back the funds over an unspecified number of years.

(Writing by Tomasz Janowski; Editing by Abi Sekimitsu)