Payments of 3.2 million yen (£21,600) will be made to survivors who underwent the procedures, regardless of whether they gave consent under a new deal.
A bill to approve compensation for victims in advance of several civil cases already progressing through the courts, is expected to be approved before the end of April.
Introduced in 1948 and modelled on similar laws in Nazi Germany, the policy saw people with learning difficulties, mental illness or physical disabilities sterilised.
The plan was carried out under the belief it would prevent the birth of “inferior” children during post-war food shortages.
Around 25,000 people are thought to have undergone forced sterilisation before Japan abolished the rules in 1996.
However, lawyers for the victims said the pay-outs would not end the legal action and criticised the wording of the bill for not offering a formal apology to the individuals from the Japanese state.
Koji Niisato, a lawyer representing the plaintiffs, told the Asahi Shimbun newspaper he was disappointed at the amount of compensation being offered.
“The individuals had their rights to decide to bear and raise children violated, so a one-time payment of 3.2 million yen will do nothing to recover the damage done,” Mr Niisato told a press conference.
More than 20 individuals have filed lawsuits against the government over the forced sterilisation law, some seeking as much as 38.5m yen (£260,000) in compensation.
“I have suffered for 60 years,” a 75-year-old man who had been forcibly castrated told the news conference. “I want the government to apologise and admit that it was wrong.”
Japan is not the only country that has been made to face up to grim revelations it had in the past conducted forced sterilisations.
In 1997, records were uncovered showing Sweden sterilised 60,000 women between 1935 and 1976, some due to physical or mental disabilities, others because they were seen to be “inferior racial types”.
Many of the women were strong-armed into agreeing to the procedures under threat of losing children or benefits under the welfare system.
The Swedish government later passed legislation offering 175,000 krona (£14,250) compensation to all victims of the programme.
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