The dollar continues to strengthen against the yen
Shares in Tokyo soared on Wednesday, while the yen, which has been tumbling in recent weeks, strengthened to 134.56 against the dollar.
The benchmark Nikkei stock index ended the morning up 3.63% at 10,573.
Prime Minister Junichiro Koizumi is reportedly chairing a meeting of the policy-setting Council on Economic and Fiscal Policy, which will announce a package later in the day.
"This is a long-term battle. It's not a quick fix", he said before the session, which follows meetings between the country's top three economy ministers and the governor of the Bank of Japan (BOJ).
However, the proposals have been widely leaked, have already been branded disappointing by analysts.
Finance Minister Masajuro Shiokawa said on Wednesday that the three economy ministers and BOJ governor had "decided on a policy aimed at boosting the stock market".
Mr Shiokawa said the Bank of Japan has been asked to inject more money into the economy at its board meeting on Thursday.
The other main tranche of the package is reported to centre on stabilising the stock market by imposing curbs on short-selling, the practice of betting on a falling market by selling shares so as to buy them back more cheaply.
But serious moves to tackle the mountain of bad loans in the banking system are thought to be lacking.
"It's window dressing", said Ryo Hino, an analyst at JP Morgan in Tokyo. "They are just leaving options open and making no decisions until they are backed into a corner."
After years of lacklustre performance, the world's second biggest economy is now mired recession, burdened with huge debts and a banking system that some analysts views as technically insolvent from propping up loss-making firms.