"The events in Japan ... teach us that events deemed absolutely unlikely can happen," Merkel said Monday in Berlin. "We have a new situation and this has to be analyzed very thoroughly."
Merkel said she had decided to have all German reactors checked for safety and then the government would decide on their future. The risk analyses will include events such as earthquakes and terrorist attacks, Merkel indicated. She suggested that older, less safe reactors could be shut down earlier than planned.
"There will be no taboos," she said. "Safety stands above everything."
Merkel added, however, that Germany won't shut down all reactors and revert to buying electricity generated by reactors abroad. Instead, Berlin would push for a more speedy transition to an energy mix dominated by renewable energy sources such as wind, solar and biomass, she said.
The decision comes after Germany's Foreign Minister Guido Westerwelle had called for a "new risk analysis," following the crisis in Japan, where a double blow of an earthquake and a tsunami may has killed thousands of people and damaged a series of nuclear reactors in the country's northeast.
There have been at least two explosions at different reactors in Japan. There have been reports that cooling systems have broken down, with widespread fears of a nuclear meltdown and a release of radiation.
Westerwelle Monday in the same news conference said officials will specifically check on the safety of the cooling systems installed at all German reactors. The German opposition has demanded that the country's seven oldest reactors be taken off the grid immediately.
Several politicians in Western nations, including in Britain and the United States, have called for similar reassessments of their governments' support for nuclear power following the events in Japan.
France, which supplies nearly 80 percent of its power needs with 58 nuclear reactors, however, defended the energy source.
"We can't switch to renewables overnight," French Environment Minister Nathalie Kosciusko-Morizet told Europe 1 radio.
Proponents of nuclear power have pointed to the fact that large-scale earthquakes are unlikely to hit Western and Central Europe. The industry is nevertheless concerned, well aware that the political fallout from the Japanese quake could kill new business.
German utilities Eon and RWE, which operate reactors in Germany and Asia, have seen shares prices tumble. Shares of EDF and Areva from France, two of the world's largest companies operating in the nuclear sector, also fell.
Areva and EDF aim to export technology to Britain and emerging powers India and China, which plan to build several new reactors over the coming decades to become less dependent on coal.
Westerwelle, however, said Monday that Germany would talk to allies in Europe on nuclear power.
"No one can deny that things have changed," following the disasters in Japan, Westerwelle said.
The European Commission estimates that nuclear power plants produce roughly one-third of the bloc's electricity consumption.
The German government last year decided to extend the running times of the country's 17 nuclear reactors by an average of 12 years. The move, unpopular with ordinary Germans even before the Japanese quake, is now coming under additional scrutiny.