Tokyo stocks rebounded Friday morning after sharp falls the previous day, while a sense of caution prevailed ahead of the Bank of Japan's policy decision later in the day.

The 225-issue Nikkei Stock Average rose 151.87 points, or 0.40 percent, from Thursday to 37,780.35. The broader Topix index was up 9.54 points, or 0.36 percent, at 2,673.07.

The U.S. dollar moved little in the upper 155 yen range after hitting a new 34-year high of 155.75 yen in New York overnight amid prospects that the Federal Reserve may keep interest rates elevated for longer than expected following recent strong economic data.

At noon, the dollar fetched 155.56-57 yen compared with 155.59-69 yen in New York and 155.62-64 yen in Tokyo at 5 p.m. Thursday.

The euro was quoted at $1.0721-0725 and 166.77-86 yen against $1.0725-0735 and 166.94-167.04 yen in New York and $1.0720-0721 and 166.83-87 yen in Tokyo late Thursday afternoon.

Japan's benchmark 10-year government bond yield rose 0.040 point from Thursday's close to 0.930 percent, its highest level since November, after a report that the BOJ was considering ways to reduce its bond buying at its policy meeting. Bond yields move inversely to prices.

On the stock market, financial issues drew buying after higher Japanese government yields raised the prospect of improved profits and some investors scooped up battered shares following the benchmark Nikkei index's 2 percent decline Thursday.

But further gains were capped by caution ahead of the BOJ policy outcome as its potential decision to reduce bond purchases could lead to a stronger yen, which would reduce the overseas profits of exporters when repatriated, brokers said.

==Kyodo

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