By Rie Ishiguro
TOKYO (Reuters) - Nine months after a historic magnitude 9.0 earthquake unleashed a deadly tsunami that wreaked havoc across Japan's northeast, the nation, armed with $155 billion in funding, is entering a critical stage of the rebuilding effort.
Damaged railways and major roads are mostly fixed with at least temporary repairs, two-thirds of ruined ports have been restored and 47,000 households moved from emergency shelters to temporary housing.
Of 22 million tonnes of rubble, two-thirds have been cleaned up, but final disposal remains a dangerous challenge because of concerns about radiation that spewed from the crippled Fukushima nuclear plant.
All the recovery efforts were made possible by initial emergency budgets totaling 6 trillion yen ($77.19 billion).
Now Tokyo and local officials must produce a plan to "build better" to give the region, long beset by a shrinking and ageing population and lack of investment, a chance of revival.
The tsunami-hit area accounts for about 6-7 percent of Japan's economic output, but the stakes are high for the entire nation. Policymakers, investors and companies are counting on the rebuilding effort to give the $5 trillion economy a jolt needed to keep it from sliding back into recession under the weight of a global slowdown and fears of contagion from Europe's debt crisis.
People and businesses, pessimistic about the region's future however, are packing up. More than 38,000 residents left the area between March and August, the biggest exodus since 1969. Of those that remain, 180,000 out of the region's 5.7 million residents have filed jobless claims between March and October, 70 percent more than a year earlier.
"The people who evacuated the area after the disaster won't feel compelled to return unless they can find stable jobs, so reconstruction without job creation would be a failure," said Hideo Kumano, chief economist at Dai-ichi Life Research Institute.
"That money will finally flow in is a good news, but it is not a guarantee of a self-sustaining recovery of quake-hit areas."
So far the news is not encouraging. Plans to modernize the struggling fishing industry or move coastal communities to higher ground, a precondition for large-scale rebuilding and investment, have been slow to materialize.
Overwhelmed local bureaucracies, opposition from fishing cooperatives and the need to win the hearts and minds of skeptical residents are getting in the way.
"Unless we can have accords with local people, we cannot proceed with rebuilding projects because there is a possibility of opposition," says a regional official in Miyagi, one of the three prefectures worst hit by the March 11 disaster.
That means it may take months before rebuilding funds start flowing to projects on the ground, local officials say.
OLD BUSINESSES, OLD PEOPLE
The national government is promising five-year tax holidays and light-touch regulation on fishing rights, land use and other issues to those who will invest in special industrial zones in disaster-hit areas. Foreign businesses are also eligible.
Industrial parks focused on automotive parts or medical equipment production as well as renewable energy projects such as wind farms are among ideas proposed by Tokyo.
The process of deciding what to build and where has only just started and only 10 out of 19 municipalities requiring rebuilding in Miyagi prefecture have reconstruction plans ready. In neighboring Iwate, eight out of 12 have such plans.
Reconstruction experts say a shortage of qualified planning professionals is one of the obstacles.
"The fact that many of quake-hit cities and towns are scarcely populated has made it difficult for local officials to create rebuilding plans on their own," said Yoshiyuki Aoki, a senior official of the government's reconstruction office in Tokyo.
He says that, whereas the 1995 Kobe quake hit residential areas constantly under redevelopment, much of the northeast has no recent history of re-zoning and city planning and lacks experts. Tokyo wants to rectify that by sending a team of specialists to help, Aoki says.
Re-establishing the fishing industry is another tough question facing planners.
Cooperatives are defending a system that only loosely ties fishermen with processing firms and retailers, but keeps rivals out and Miyagi governor's initiative to open the business to outsiders got drowned in protests.
Shigeru Tabeta, professor of ocean technology and environment at the University of Tokyo who is assisting with rebuilding of port towns, says preserving the status quo is self-defeating.
Tax breaks and incentives will only work if Japan opens its protected farming and fisheries to foreigners, experts say.
With no magic bullet in sight, spending more on a solid safety net may be the only way to keep communities intact until revitalization plans materialize, says Iwao Sato, sociology of law professor at the University of Tokyo.
His survey of the fishing town of Kamaishi showed more than a third of residents were out of work, compared with a fifth before the quake while the population of self-employed has fallen to 17 percent from 28 percent.
"The government has mostly focused on building seabanks, elevating land levels and other infrastructure development," Sato says. "But more attention is probably needed on supporting the livelihoods of people through direct assistance on employment and homes, or else people will leave."
($1 = 77.7300 Japanese yen)
(Editing by Tomasz Janowski and Matthew Driskill)