WRAPUP 7-Japan says must review nuclear power policy as crisis persists

* Contamination fears spread in Japan and beyond

* Govt spokesman says Japan must review nuclear power policy

* U.S., Hong Kong, Australia, Singapore restrict food
imports

* Engineers battle to stabilise Fukushima reactors

(Adds three workers injured, merchant ships)

By Linda Sieg and Sumio Ito

TOKYO, March 24 (Reuters) - Japan will have to review its
nuclear power policy, its top government spokesman said on
Thursday as radiation from a damaged nuclear complex briefly
made Tokyo's tap water unsafe for babies and led to people
emptying supermarket shelves of bottled water.

Engineers are trying to stabilise the six-reactor nuclear
plant in Fukushima, 250 km (150 miles) north of the capital,
nearly two weeks after an earthquake and tsunami battered the
plant and devastated northeastern Japan, leaving nearly 26,000
people dead or missing.

"It is certain that public confidence in nuclear power
plants has greatly changed," Japanese Chief Cabinet Secretary
Yuki Edano told Reuters.

"In light of that, we must first end this situation and then
study from a zero base."

Before last week, Japan's 55 nuclear reactors had provided
about 30 percent of the nation's electric power. The percentage
had been expected to rise to 50 percent by 2030, among the
highest in the world.

There were no fresh incidents of smoke or steam at the plant
on Thursday, but four of the plant's reactors are still
considered volatile, although on the way to stability.

"It's still a bit early to make an exact time prognosis, but
my guess is in a couple of weeks the reactors will be cool
enough to say the crisis is over," said Peter Hosemann, a
nuclear expert at the University of California, Berkeley.

"It will still be important to supply sufficient cooling to
the reactors and the spent fuel pools for a longer period of
time. But as long as this is ensured and we don't see any
additional large amount of radioactivity released, I am
confident the situation is under control."

Tokyo's 13 million residents were told not to give tap water
to babies under 1 year old after contamination hit twice the
safety level this week. But it dropped back to allowable amounts
on Thursday.

Despite government appeals against panic, many supermarkets
and stores sold out of bottled water.

"Customers ask us for water. But there's nothing we can do,"
said Masayoshi Kasahara, a store clerk at a supermarket in a
residential area of eastern Tokyo. "We are asking for more
deliveries but we don't know when the next shipment will come."

Radiation above safety levels has also been found in milk
and vegetables from Fukushima and the Kyodo news agency said
radioactive caesium 1.8 times higher than the standard level was
found in a leafy vegetable grown in a Tokyo research facility.

Singapore said it had found radioactive contaminants in four
samples of vegetables from Japan.

Earlier, it and Australia joined the United States and Hong
Kong in restricting food and milk imports from the zone, while
Canada became the latest of many nations to tighten screening
after the world's worst nuclear crisis since Chernobyl.

A shipping industry official, meanwhile, said some merchant
vessels may be avoiding Tokyo port due to concern that crew
members may be exposed to radiation.

Radiation particles have been found as far away as Iceland,
and although Japan insists levels are not dangerous to adults,
it is the nation's most testing time since world War Two.

DAMAGE

The estimated $300 billion damage from the 9.0 magnitude
earthquake and ensuing tsunami makes it the world's costliest
natural disaster, dwarfing Japan's 1995 Kobe quake and Hurricane
Katrina, which swept through New Orleans in 2005.

In Japan's north, more than a quarter of a million people
are in shelters. Some elderly displaced people have died from
cold and lack of medicines.

Exhausted and traumatised rescuers are still sifting through
the mud and wreckage where towns and villages once stood.

The official death toll from the disaster has risen to
9,523, but is bound to rise as 16,094 people are still missing.

Amid the suffering, though, there was a sense that Japan was
turning the corner in its humanitarian crisis. Aid flowed to
refugees, and phone, electricity, postal and bank services began
returning to the north, sometimes by makeshift means.

"Things are getting much better," said 57-year-old Tsutomu
Hirayama, staying with his family at an evacuation centre in
Ofunato town.

"For the first two or three days, we had only one rice ball
and water for each meal. I thought, how long is this going to go
on? Now we get lots of food, it's almost like luxury."

Aftershocks are still jolting the country. Several shook
Tokyo on Thursday.

ADMIRATION FOR NUCLEAR WORKERS

At the Fukushima plant, technicians have successfully
attached power cables to all six reactors and started a pump at
one to cool overheating fuel rods.

Nearly 300 engineers, fast becoming national heroes for
braving danger inside an evacuation zone, are fighting to cool
fuel rods at the reactors.

They resumed work on Thursday at the No.3 reactor,
considered the most critical, after a one-day suspension when
black smoke was seen rising.

Operator Tokyo Electric Power Co (TEPCO) is trying
to re-start systems to keep the fuel cool and prevent further
radiation leaks or a complete meltdown, the nightmare scenario.

Three TEPCO employees who were working in water to connect a
cable were injured by radiation on Thursday and two were taken
to hospital with burns, the nuclear safety agency said.

Japan has urged the world not to overreact, and plenty of
experts appeared to back that up.

Jim Smith, of Britain's University of Portsmouth, said the
finding of 210 becquerels of radioactive iodine, twice the
safety limit, at a Tokyo water purification plant on Wednesday
should not be cause for panic. The safety level for adults is
300 becquerels.

"The recommendation that infants are not given tap water is
a sensible precaution. But it should be emphasised that the
limit is set at a low level to ensure that consumption at that
level is safe over a fairly long period of time," he said.

"This means that consumption of small amounts of tap water
-- a few litres, say -- at twice the recommended limit would not
present a significant health risk."

The crisis in the world's third-biggest economy -- and its
key position in global supply chains, especially for the
automobile and technology sectors -- has added to jitters in
global financial markets, also worried by conflict in Libya and
Middle East protests.

Toyota Motor Corp , which has suspended
production at all of its 12 assembly plants in Japan, said it
would slow some North American production because of supply
problems although it would try to minimise disruptions.

(Additional reporting by Mayumi Negishi, Shinichi Saoshiro and
Kiyoshi Takenaka in Tokyo; Yoko Nishikawa in Unosumai, Jon
Herskovitz and Chisa Fujioka in Minamisanriku; Editing by John
Chalmers)