TOKYO (Reuters) -- Alarmed by its sliding birth rate and rapidly ageing population, Japan is hoping the prospect of lower shopping bills will encourage couples to go for bigger families.

The government is considering issuing identity cards to families with children which would give discounts at stores cooperating with the program, the Yomiuri Shimbun daily said on Thursday.

The size of the discounts would be decided by the stores, which would also be expected to fund the system in return for favorable publicity surrounding the plan, the Yomiuri said.

The government is also considering tax rebates as a way of reducing the economic burden on parents of young children, which is seen as one reason for the declining birth rate.

Japan's fertility rate -- the average number of children a woman bears in her lifetime -- fell to a postwar low of just under 1.29 in 2004. Demographers say a rate of 2.1 is needed to keep a population from declining.

The nation's population shrank in the year to October for the first time since 1945.