By Taiga Uranaka and Yoko Nishikawa
TOKYO (Reuters) - Japan made some progress on Sunday in its race to avert disaster at a nuclear power plant leaking radiation after an earthquake and tsunami that are estimated to have killed more than 15,000 people in one prefecture alone.
Three hundred engineers have been battling inside the danger zone to salvage the six-reactor Fukushima plant in the world's worst nuclear crisis since Chernobyl 25 years ago.
"I think the situation is improving step by step," Deputy Chief Cabinet Secretary Tetsuro Fukuyama told a news conference.
Police said they believed more than 15,000 people had been killed by the double disaster in Miyagi prefecture, one of four that took the brunt of the tsunami damage. In total, more than 20,000 are dead or missing, police said.
The unprecedented crisis will cost the world's third largest economy as much as $248 billion and require Japan's biggest reconstruction push since post-World War Two.
It has also set back nuclear power plans the world over.
Economics Minister Kaoru Yosano put the economic damage at above 20 trillion yen ($248 billion), which was his estimate of the total economic impact of the 1995 earthquake in Kobe.
Yosano said government spending was likely to exceed the 3.3 trillion yen Tokyo spent after Kobe, which up to now has been considered the world's costliest natural disaster.
Markets will be closed on Monday for a public holiday.
Encouragingly for Japanese transfixed on work at the Fukushima complex, the most critical reactor -- No. 3, which contains highly toxic plutonium -- stabilized after fire trucks doused it for hours with hundreds of tonnes of water.
"We believe the water is having a cooling effect," an official of plant operator Tokyo Electric Power Co (TEPCO) said.
Work also advanced on bringing power back to water pumps used to cool overheating nuclear fuel, and temperatures at spent fuel pools in reactors No. 5 and 6 were returning to normal.
Technicians attached a power cable to Nos. 1, 2, 5 and 6 reactors, hoping to restore electricity later in the day prior to an attempt to switch the pumps on.
They aim to reach No. 4 on Monday or Tuesday.
If successful, that could be a turning point in a crisis rated as bad as America's 1979 Three Mile Island accident.
If not, drastic measures may be required such as burying the plant in sand and concrete, as happened at Chernobyl in 1986, though experts warn that could take many months and the fuel had to be cooled first.
On the negative side, evidence has begun emerging of radiation leaks from the plant, including into food and water.
Though public fear of radiation runs deep, and anxiety has spread as far as the Pacific-facing side of the United States, Japanese officials say levels so far are not alarming.
Traces exceeding national safety standards were, though, found in milk from a farm about 30 km (18 miles) from the plant and spinach grown in neighboring Ibaraki prefecture.
The government ordered additional tests and depending on the results may ban sales and shipments of food products from areas in the vicinity of the plant.
The first discovery of contaminated food since the March 11 disaster is likely to heighten scrutiny of Japanese food exports, especially in Asia, their biggest market.
Tiny levels of radioactive iodine have also been found in tap water in Tokyo, about 240 km (150 miles) to south. Many tourists and expatriates have already left and residents are generally staying indoors.
Harmless levels of iodine and cesium were also found in northern Ibaraki and in dust and particles in the greater Tokyo area, the government said on Sunday.
The fresh reports did not appear to have much effect on people in the metropolis, one of the world's biggest cities with a population of about 13 million.
"I think we need to monitor it, but I am not going to stop eating vegetables today," said Andy Ross, an American buying vegetables at a store in Tokyo.
But Physicians for Social Responsibility, a U.S. non-profit advocacy group, called for a halt to new nuclear reactors in the United States.
"There is no safe level of radiation exposure," said Jeff Patterson, a former president of the group.
Facing criticism of its early handling of the situation, TEPCO's president issued a public apology for "causing such great concern and nuisance."
Even after restoring power, the company faces a tricky task reactivating the cooling pumps, with parts of the system probably damaged from the quake or subsequent explosions.
"The workers need to go through the plant, figure out what survived and what didn't, what can be readily repaired and get the cooling systems back up and running to deal with the cores and the spentfuel pools," said David Lochbaum, of U.S. nuclear watchdog the Union of Concerned Scientists.
U.N. watchdog the International Atomic Energy Agency (IAEA) offered encouragement. Its chief, Yukiya Amano, who is Japanese, hailed the "strengthening" of work at the site.
Prime Minister Naoto Kan, who has kept a low profile during the crisis except for shouting at TEPCO, sounded out the opposition about forming a government of national unity to deal with the crisis.
But the largest opposition party rejected that.
Showing the incredible power of the 9.0 magnitude earthquake, the largest to hit tremor-prone Japan since accurate records began in the early 1900s, Oshika peninsula in Miyagi prefecture shifted a whole 5.3 meters (17 ft) east and its land sank 1.2 meters (4 ft).
The quake and ensuing 10-meter high tsunami devastated Japan's north east coastal region, wiping towns off the map and making more than 360,000 people homeless in a test for the Asian nation's reputation for resilience and social cohesion.
Food, water, medicine and fuel are short in some parts, and low temperatures during Japan's winter are not helping.
The traumatic hunt for bodies and missing people continues.
"This morning my next door neighbor came crying to me that she still can't find her husband. All I could tell her was, 'We'll do our best, so just hold on a little longer,'" said fire brigade officer Takao Sato in the disaster zone.
About 257,000 households in the north still have no electricity and at least 1 million lack running water.
Japan's crisis spooked markets, prompted a rare intervention by the G7 group of rich nations to stabilize the yen on Friday, and fueled concerns that world economy may suffer because of disrupted supplies to auto and technology industries.
Automaker General Motors Co said it was suspending all non-essential spending and global travel, plus freezing production at a plant in Spain and cancelling two shifts in Germany while it assessed the impact of the Japan crisis. ($1 = 80.610 Japanese Yen)
(Additional reporting by Chikako Mogi in Tokyo, and Yoko Kubota and Chang-ran Kim in Rikuzentakata, Gleb Bryanski in Yuzhno-Sakhalinsk, Russia, Eileen O'Grady in Houston, Fredrik Dahl and Sylvia Westall in Vienna, Suzanne Cosgrove in Chicago, Writing by Nick Macfie; Editing by Alex Richardson)