The Fukushima plant north of Tokyo was battered by an earthquake and tsunami in March 2011, leading to meltdowns and explosions that sent plumes of radiation into the air and sea.
About 150,000 people were evacuated. A large area of surrounding land is off-limits because of radiation but the government is hoping to eventually allow everyone to go home.
But Shigeru Ishiba, secretary general of the ruling Liberal Democratic Party (LDP), said it was inevitable that some people would never go back.
"The time will definitely come that someone must say 'they cannot live in this area but they would be compensated'," Ishiba was quoted as saying in the Asahi Shimbun newspaper.
The question of letting people go home is politically sensitive for the government and it would not want to have to tell thousands of residents that cannot go back.
The plant's operator, Tokyo Electric Power Co, has been struggling to stop radiation leaks from the wrecked plant.
It is now preparing to remove 400 tonnes of highly irradiated spent fuel from a damaged reactor building, a very dangerous operation that has never been attempted before on this scale.
Ishiba also said authorities might have to relax limits for radiation exposure if anything was ever going to be done in terms of re-building the area.
"Unless we come up with answer as to what to do with a measure for decontamination, reconstruction of Fukushima won't ever make progress," Ishiba was quoted as saying.
(Reporting by Tetsushi Kajimoto; Editing by Robert Birsel)
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