Taiga Uranaka and Antoni Stockowsky write: Japanese government funds budgeted for reconstruction and transferred to local governments are stuck in banks across the tsunami-ravaged northeast.  The central government has paid out more than $50 billion directly to local governments in Miyagi, Iwate and Fukushima prefectures, the areas hardest hit by the disaster. But about 60 percent of that money remains on deposit in the region’s banks.

Ishinomaki, where more than 3,700 people died in the tsunami – the most casualties of any city in the disaster – has been deeply affected by the funding paralysis. The port city, where 56,000 buildings were damaged, has been showered with money for reconstruction – about $4.1 billion in the three years after it was hit.

But almost 60 percent of the money, or $2.3 billion, remains in bank deposits. And fewer than five percent of the planned new homes for the city’s nearly 25,000 evacuees have been completed.

Makoto Kitamura, the deputy director general of the Reconstruction Agency, says local government spending of reconstruction money has been accelerating. “The pace of the construction projects has also been picking up,” he told Reuters, sitting in his office in Tokyo. “So it is not something you should worry about.”

For Prime Minister Shinzo Abe, the reconstruction delays are a potential time bomb. Before he became prime minister in December 2012, Abe campaigned in parliamentary elections on a pledge to speed up reconstruction – a promise he has repeated on both anniversaries of the disaster since he took office.

As prime minister, he vowed in March 2013 that “reconstruction will have made a lot of progress and our lives will be better by March 11 next year.” A year later he repeated the promise: The government would make the year ahead one in which “everyone in disaster-hit areas feels the progress of reconstruction.”

So far, about 2,700 housing units of a planned 29,000 have been completed in the tsunami-hit areas. In its housing plan issued more than a year ago, the government said it aimed to complete 15,000 homes by March next year. It has since scaled back that target to 10,000 units.

A labor shortage exacerbated by the siphoning of workers away from the disaster zone to build commercial facilities for the 2020 Tokyo Olympic Games has slowed reconstruction. So have a spike in the cost of building materials and problems in procuring land in the disaster zone.

Much of the reconstruction cash has ended up on the ledger of 77 Bank in Sendai, some 50 kilometers west of Ishinomaki. Government deposits at 77 Bank, the region’s largest lender, have jumped four-fold to almost $17 billion in the past three years as reconstruction money flooded in, the bank said.  Like 77 Bank, other regional lenders have also ploughed funds into Japanese government bonds, creating a closed loop of financing. By buying government bonds, the banks’ investments are essentially helping to fund the borrowing that the government undertook to make the disaster-related allocations in the first place. The central government issued $130 billion worth of reconstruction bonds in the three years after the disaster.

The unspent funds sitting in bank deposits also come at a cost to Tokyo. The government is under mounting pressure to cut a public debt load that is more than twice as large as annual economic output.

Separate from the money allocated directly to the prefectures, the central government has poured $140 billion into disaster-relief and reconstruction projects, including emergency loans to small- and medium-sized businesses hit by the tsunami.

The government’s five-year reconstruction plan was built on unrealistic assumptions, said Yoshikiyo Shimamine, the chief economist at Dai-ichi Life Research Institute in Tokyo. “Given bottlenecks such as labor shortages and material cost rises and difficulties in getting consensus among residents who are relocated, reconstruction budgets are not something that can be spent within five years,” he said.

Officials in Ishinomaki, home to 150,000 people, say spending the more than $4 billion in reconstruction aid has proven tough. With all of the city-owned land having been designated for temporary housing after the tsunami, the local government had to negotiate the purchase of an additional 9,000 plots to build permanent homes. That inflated the price of a plot of land in Ishinomaki by 15 percent last year, the biggest jump anywhere in Japan.

Before the city could buy land, it had to track down the legal owners. That proved tedious, said Oka. Officials discovered that in many instances, properties had been passed down without proper inheritance procedures.

After the tsunami, about a third of public works projects in Miyagi failed to attract bidders in the first round as construction companies say they held back for fear the projects would be unprofitable.

A strip of Ishinomaki’s shoreline where 6,500 homes once stood has been declared too dangerous to build on. And many local government officials, who would otherwise have played a role in reconstruction, either died in the tsunami or had their homes destroyed and are themselves living in temporary dwellings.

Juan Pecquet writes:  European officials, not the Lebanese, are the ones raising sharp questions about Hezballlah sanctions legislation that unanimously passed the House in July.  European officials are worried about crippling Lebanon’s economy even as Beirut’s bankers say they’re OK with the House-passed Hezbollah sanctions bill.  The legislation has stalled in the Senate partly as a result, but the bill’s backers are confident they can address any concerns.

Lebanese bank officials in  contrast have said they can live with the new restrictions, especially after a lengthy “findings” section that could have cast the country’s financial sector in a negative light was cut from the bill.

Concern is not as much with the American financial institutions as it is with some of the European financial institutions — and the pushback is coming primarily from that entity.

The EU has been reluctant to break ties with the Shiite militia — it labeled Hezbollah’s so-called military wing a terrorist organization only last year under rising US pressure — and has not blacklisted the group’s bank accounts and assets. Countries such as France insist on maintaining open channels with the most powerful political force in Lebanon.

“We are in contact with working-level staffers of Congress on a very regular basis to exchange on many foreign policy issues,” a French diplomatic source said. “Lebanon is one of the issues discussed, as are Africa, Ukraine, Syria, Iraq or Ebola to name just a few over the last few months.”

The British government did not respond to a request for comment.

Joseph Gebeily, president of the Lebanese Information Center in Washington, said Hezbollah relies on the European financial sector in part because it actively avoids Lebanese banks.  “Hezbollah’s image is important to Hezbollah. They don’t want to be seen as doing damage [to the Lebanese banking sector],  Even Hezbollah parliamentarians can’t open an account.”