The stimulus, which had been forecasted for weeks, will be formally approved Sept. 10 and implemented next month. Prime Minister Naoto Kan on Monday revealed only the basics of the plan but said it will target employment help for young job seekers, investment in green industries and aid for small businesses. The stimulus funds come from a pool of unspent money from the 2010 budget.

Economists say the plan’s modesty reinforces the degree to which Japan is hamstrung by its own public debt – roughly twice the size of its gross domestic product – as it tries to revive the world’s third-largest economy. The government is reluctant to spend too much or issue more government bonds for a larger stimulus. But in the meantime, export growth is slowing, undermining the foundation of an export-reliant economy.

“We want to take swift measures with the two pillars of this stimulus and the monetary easing the [Bank of Japan] decided today,” Kan said.

Both Kan and Japan’s central bank faced criticism in recent weeks for their slow response as the yen surged to a 15-year high, measured against the dollar. A rising yen increased the price of Japanese exports overseas, hurting corporations such as Sony and Toyota.

Accustomed to among the world’s highest growth rates in the 1970s and 1980s, Japan has since seen two lost decades, with fears now emerging about a third. Japan’s economy grew at just 0.1 percent in the second quarter this year, less than expected. And correspondingly, Japan’s economy – the world’s second-largest since 1968 – was surpassed by China.

Kan’s announcement followed an earlier Bank of Japan emergency meeting, where the bank’s board agreed to offer financial institutions 10 trillion yen in six-month loans. This, coupled with the three-month loans (worth 20 trillion yen) that were implemented late last year, now gives banks access to 30 trillion yen – or roughly $355 billion – at a rate of 0.1 percent.

Given the government’s restricted ability to aid Japan’s economy with spending, the bank has faced political pressure this month to cap the yen’s rise and boost liquidity.

The Bank of Japan said in a statement that it “recognizes that Japan’s economy faces the critical challenge of overcoming deflation and returning to a sustainable growth path with price stability.” It added, “The Bank believes that the monetary easing measure, together with the government’s efforts, will be effective in further ensuring Japan’s economic recovery.”

Both analysts and the markets were underwhelmed by the central bank’s measures. Following the announcement, the yen actually strengthened – rising to 85.12 on the dollar. The Nikkei index, meanwhile, lost its early morning gains following the central bank’s announcement. For the day it rose 1.76 percent.

“The BOJ measures were pretty much as expected,” said Edwin Merner, president of Tokyo’s Atlantis Investment Research. “It helps a little bit – if it’s followed by government action. The government could be adding measures that don’t cost anything. Cutting taxes. Guaranteeing loans for overseas contracts. They could do those things. But they’re not.”