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Bank of Japan expected to continue with monetary policy

The Bank of Japan is expected to stick with its monetary policy next week despite the recent increase in bond yields.

It is possible for the central bank to front-load bond purchases or offer funds via market operations more frequently if the market turbulence continues, Reuters reports.

The bank is expected to hold off on easing policy, while increasing its asset purchases as it has already pledged to double its bond holdings in two years to expand the supply of money at an annual pace of 60 trillion ($588 billion) to 70 trillion yen.

Japan's top three banks reported strong earnings for the 12 months that ended in March, which was mostly due to gains from bond holdings and a recovery in the Tokyo stock market.

The Nikkei Stock Average has improved drastically in recent months, which has happened as a result of the government's economic policies.

Last month, the Bank of Japan released a large amount of stimulus, and promised to inject 143.2 trillion yen into the economy in the next two years to meet its pledge of achieving two per cent inflation in the same time frame.

By Claire Archer