The report says poor oversight may also have contributed to the crisis.
The authorities have pledged to make the country's nuclear regulator (Nisa) independent of the industry ministry, which also promotes nuclear power.
It comes after Nisa doubled its initial estimate of leaked radiation in the first week after the disaster.
The nuclear safety agency now says 770,000 terabecquerels escaped into the atmosphere following the 11 March disaster - more than double its earlier estimate of 370,000 terabecquerels.
Although the amount is just 15% of the total released at Chernobyl in Ukraine in 1986 - the world's worst nuclear disaster - it suggests the contamination of the area around the plant is worse than first thought.
More than 80,000 local residents living within a 20km (12 mile) radius of the plant have been evacuated from their homes. A voluntary evacuation policy is operating in the area 20-30km from the plant.
Nearly three months into the crisis, the Fukushima Daiichi plant is still leaking radioactive material.
Chief Cabinet Secretary Yukio Edano says more evacuations are being considered. Monitoring shows the lie of the land and wind patterns may be causing a build-up of radiation in other areas.
The government admitted that it was unprepared for a severe accident, in a report by Japan's nuclear emergency taskforce, to be handed in to the IAEA later this month.
''We are taking very seriously the fact... that consistent preparation for severe accidents was insufficient.
"In light of the lessons learned from the accident, Japan has recognised that a fundamental revision of its nuclear safety preparedness and response is inevitable,'' the taskforce said in an outline of the report.
The report also confirms that three reactors went into meltdown earlier than previously thought when the earthquake and tsunami knocked out cooling systems and back-ups.
Earlier, Nisa said that in reactor No 1, molten nuclear fuel dropped to the bottom of the pressure vessel within five hours of the quake - 10 hours earlier than initially estimated by operator Tepco.
The safety agency also said a meltdown damaged the No 2 reactor after 80 hours, and the No 3 reactor after 79 hours of the twin natural disasters.
But the government says it is still on track to bring the reactors at Fukushima to a cold shutdown by January at the latest.
The government report comes as an independent 10-member expert panel begins an investigation into the causes of the nuclear accident.
An investigation by the UN's nuclear watchdog, the IAEA, has already pointed out a key failure - admitted by Japan - to plan for the risk of waves crashing over the sea wall and knocking out the plant's back-up generators.
Even though a major faultline lies just offshore, the sea wall at Fukushima was less than 6m (20ft) high. The height of the tsunami wave was about 14m.
In its draft report, the IAEA said continued monitoring of the health and safety of the nuclear workers and the general public was necessary.
The report also emphasised the importance of independent regulators in the nuclear industry.