Frequency-Scanning interferometry (FSI) is often used for high-precision and large-scale static distance measurement. When FSI is applied to the measurement of high-speed moving targets in narrow space, the initial distance cannot be set large. The Doppler effect caused by target motion is serious. So, the interference signal will appear negative frequency component. Current frequency identification methods can only recognize positive frequencies, so the phase extraction can only extract monotonically increasing phase changes. This will result in the clearance demodulation error. A clearance measurement method based on FSI for high speed target in narrow space is proposed in this paper. By extracting the time-frequency information, utilizing the bidirectional threshold to determine the zero value of frequency, a sign judgement function is constructed to achieve the frequency and phase correction. The above procedure can avoid demodulation error in the initial clearance demodulation value. The experimental results show that the modified initial clearance demodulation error decreases from 36.5% to 0.4% at 12000 rpm.