The 21-member crew of the ship have been rescued and no injuries were reported, but images from the scene show the ship has split in two.
Efforts are being made to bring the oil leak under control, officials said.
Pictures taken by the Coast Guard showed the 39,910-tonne Panamanian ship - Crimson Polaris - split in two parts, with the cargo ship’s hind section floating in the sea. Polaris was transporting wood chips from Thailand before it ran aground in Japan’s Hachinohe harbour.
Almost 24 hours after it halted, a 5.1 km by 1 km thick strip of oil leak from the ship began and a appeared in the hull on Thursday morning, the Coast Guard said. Containment measures by patrol boats are underway.
According to a report by Kyodo News, the ship’s crew initially managed to refloat the vessel from the port. However, compounded by bad weather which forced difficulties in the freighter’s movement, it soon became impossible for the crew to navigate leading them to drop anchor around 4 kilometres off the coast, the report added.
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