The move will mark the first time Japan has brought in foreign nurses and care workers on a full-time basis, the Nikkei business daily said.
For two years from April, Japan will annually accept 200 licensed nurses and 300 certified care workers, the newspaper said.
If the programme is well received, the figures may be increased for the third year, the Nikkei said.
Nurses will be limited to staying for three years and care workers for four years on their Indonesian certificates and licences. But they can extend their stay by passing Japanese nursing exams or receiving Japanese caregivers certificates.
The workers will work as assistants at hospitals and nursing care facilities after receiving language training.
government submitted the measure to the legislature earlier this month with an eye to approval in the current Diet session or early next year.
A similar effort is underway to employ workers from the Philippines, but the economic partnership agreement with that country has yet to take effect, the paper added.
The Japanese health ministry estimates the nation needs 40,000 more nurses, while the shortage is estimated to reach 450,000 to 550,000 by 2014, the Nikkei said.