* New agency to be separated from pro-nuclear trade ministry

* Environment minister to head new agency -media

* Critics say existing regulator too close to utilities

TOKYO - Japan will unveil plans as early as this week for a new atomic safety regulator which is expected to lead to tougher safety standards and higher costs for nuclear power operators.

The current watchdog's cosy ties with the industry was widely seen as a key contributing factor in Japan's failure to prevent the worst nuclear crisis in 25 years.

In an attempt to address this, the government plans to bring the Nuclear and Industrial Safety Agency (NISA) together with another government advisory body to be placed under the Environment Agency, according to media reports. An announcement of that plan is expected on Friday.

The move could mean stricter rules, but experts warn that it alone will not ensure effective oversight of the increasingly unpopular nuclear industry, nor will it be enough to restore public faith in Japan's power companies.  

"The key is if the new agency will not be independent just in appearance, but if it can actually secure its ability to regulate," said Hideaki Shiroyama, a professor at the University of Tokyo, speaking ahead of the media reports.

Damaged by the meltdowns at the Fukushima plant triggered by a huge quake and tsunami in March, public trust has since been shattered by reports of poor planning and safety lapses that happened before the disaster.  

Suspicion deepened further last week after central Japanese utility Chubu Electric Power Co revealed that NISA had asked it to recruit local residents to attend a public forum to manipulate the outcome of a debate on nuclear power in 2007.

"Regulators until now have been reliant on utilities and did not need to be so proactive. But if the they are going to regulate on their own, then the big issue is how to guarantee their capabilities, sensitivities and resources," Shiroyama said.

Prime Minister Naoto Kan has said Japan should wean itself from dependence on nuclear power, although for now it needs to rely on nuclear reactors to avoid power shortages that would harm a fragile economy.  

A recent poll showed some 70 percent of Japanese voters backing Kan's call.

ENERGY POLICY OVERHAUL

The new agency, which will also be responsible for nuclear accident investigations, will still be a part of the government and will be headed by the environment minister, the Nikkei newspaper said.

"You can't appoint the environment minister ... This is very problematic," said Tetsunari Iida, executive director of the Institute for Sustainable Energy Policies.

Cabinet ministers who often step down within a year of appointment should not oversee nuclear safety, Iida said, also suggesting the new director should not represent nuclear industry interests.

Nuclear Crisis Minister Goshi Hosono has said that he aimed to implement plans for a regulator agency next April, but enabling legislation must first pass the divided parliament, where the opposition controls the upper house.

Chief Cabinet Secretary Yukio Edano said the plan reported by the Asahi and Nikkei newspapers on Wednesday was one of several ideas under consideration, but no final decision has been made.

Since the March earthquake and tsunami triggered fuel core meltdowns and radiation leaks at the Fukushima plant, calls have mounted for an overhaul of Japan's energy policy.

Public concerns over nuclear safety have prevented the restart of reactors shut for routine maintenance, leaving only 16 reactors working out of 54 that were available for power generation before the March 11 disaster, and raising the possibility that no reactors may be running by May 2012.

The Fukushima disaster also spurred other countries to review their safety standards. A task force recommended in July that the U.S. nuclear regulator take a tougher approach to safety, which could force plants to plan for catastrophes far more violent than those they were originally designed to withstand.