Japan’s new government unveiled a $226.5-billion stimulus plan on Friday in the latest bid to boost the world's number three economy, with plans to rebuild disaster-hit areas and beef up the military.

Japanese investors welcomed the news, with the Nikkei index surging to a 22-month high and the yen tumbling, but some analysts questioned its long-term effect and warned it could lead to more misery further down the line.

Prime Minister Shinzo Abe, who came to power in a landslide election victory last month, followed through with one of his key pledges by outlining details of a big-spending plan designed create jobs and end deflation.

“With the measures, we will achieve real GDP growth of 2 per cent and 600,000 jobs will be created,’’ he told a briefing.

Japan’s economy shrank by 0.6 per cent in 2011. Last year’s gross domestic product figures are yet to be released. — Reuters