Taro Aso, Japan’s Prime Minister, is poised to announce a Y15.4 trillion stimulus package that will include cash incentives for women to produce children, subsidies for new fridges and infrastructure spending to help cope with outbreaks of “guerrilla rain”.

The spending, said government sources, will target a variety of areas of the economy that have been hammered by the country's most acute recessionary nosedive since the Second World War. Nearly Y2 trillion will be lavished on employment subsidies and a similar sum on health measures, such as breast cancer screening.

The Y1.6 trillion earmarked for environmental spending will include cash enticements for people to trade in their old electrical equipment or cars, and money for plastering the roofs of public buildings with solar panels.

Veteran Japan-watchers said, though, that alarm-bells should be sounded over the Y2.6 trillion that will apparently be diverted towards infrastructure-building. That spending will reportedly include “connecting roads that are currently unconnected” – a possible reference to the notorious “roads to nowhere” that came to symbolise Japan’s egregious pork-barrel spending during the 1980s.

Similar questions were raised over the need for “security” spending to protect Japan’s major cities from the threat of “guerrilla rain” – the flash downpours whose frequency has supposedly risen in recent years and pose a potential threat to transport infrastructure.

The cash injections, which will be detailed formally tomorrow but already seem far heftier than the market expected, will represent about 3 per cent of GDP and delivers a heavy blow to Japan’s vastly overstretched fiscal position. Bond yields soared to a six-month high after the Chief Cabinet Secretary revealed that the lion’s share of the spending would be financed through about Y11 trillion of new debt issuance.

Described by one senior economist as a “do-or-die” moment for both Japan and the unpopular Mr Aso, rumours of the stimulus spending triggered a huge rally for Tokyo shares. The Nikkei 225 Index leapt more than 4 per cent higher, helped along by an unexpected rise in private sector machinery orders.

Kato Susumu, an economist at Calyon Securities, said that the measures might push Japan’s 2009 GDP up by around 0.5 percentage points and could conceivably restore some momentum to Mr Aso’s economic policies – policies that have been roundly condemned by private sector analysts as ill-conceived and insufficient.

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