(Corrects paragraph 10 to ...1,200 litres ..., not 1.5 litres.)

By Issei Kato

KASHIWAZAKI, Japan, July 17 (Reuters) - Nearly 8,000 people spent an anxious night in evacuation centres in northwestern Japan after a strong earthquake flattened hundreds of houses and killed at least seven people.

Forecasts for two days of rain in the area raised fears of further mudslides that would add to the devastation.

Houses collapsed and water, gas and electricity supplies were cut by the 6.8 magnitude quake in Niigata prefecture, which also caused a small radiation leak and fire at the world's biggest nuclear plant.

Seven elderly people were killed, a police spokesman said, and a 77-year-old man was reported missing after going for a walk before the tremor hit at 10:13 a.m. (0113 GMT) on Monday. The quake injured more than 800.

Koji Tamura, a 45-year-old businessman at an evacuation centre in Kashiwazaki, had been working when the quake struck.

"I went back to my home and found my house flattened," he said. "I was worried about my mother -- I thought she was crushed. But I was relieved to find she was alive."

The quake halted gas service to about 35,000 homes and disrupted the water supply to all of Kashiwazaki, a city with a population of around 95,000 that was hardest hit by the quake. About 25,000 homes in Niigata prefecture were without electricity, local officials and media said.

Aftershocks from the mid-morning quake continued into the night. The country was rattled late in the evening by a deep tremor under the Sea of Japan estimated at magnitude 6.6 to 6.8 that swayed buildings in Tokyo, but there were no immediate reports of further damage.

Japan is one of the world's most earthquake-prone countries.

RADIATION LEAK

Tokyo Electric Power Co (TEPCO) said 1,200 litres (317 U.S. gallons) of water containing radioactive materials had leaked from a unit at its Kashiwazaki-Kariwa nuclear power plant -- the world's largest.

The contaminated water had been released into the ocean and had had no effect on the environment, the company said in a statement, adding that the quake was stronger than its reactors had been designed to cope with.

A fire in an electrical transformer at the plant was quickly extinguished but it was unclear when TEPCO could restart three power units there.

Houses, many wooden with traditional heavy tile roofs, collapsed and roads cracked in Monday's quake, which was centred in the same northwestern area as a tremor three years ago that killed some 65 people.

RAIN FEARS

Troops and extra emergency teams helped with rescue and relief efforts, including distributing water and rice, while Prime Minister Shinzo Abe cut short campaigning for parliamentary elections to inspect damage.

"We need to take every step to take lives. It's supposed to rain tomorrow (Tuesday) in the area so we have to take every step to save lives, secure lifelines and reassure people," Abe told reporters.

The government set up an emergency office to deal with the quake, which officials said had damaged about 500 buildings.

"I was sitting on the balcony and was scared to death," said Kiyono Fujisawa, a 70-year-old farmer, who lives with five others including her daughter and grandchildren in a house that was partly destroyed.

"Look at my house. I'm too scared to go back in."

Bullet trains stopped services in northern Japan for a time after the quake and a local train toppled from the rails, but media said no one was injured.

Niigata was hit in October 2004 by a quake with a matching magnitude of 6.8 that killed 65 people and injured more than 3,000.

That was the deadliest quake in Japan since a magnitude 7.3 tremor hit Kobe city in 1995, killing more than 6,400.

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