By Kevin Buckland

TOKYO, April 21 (Reuters) - The dollar edged up on Thursday supported by expectations for aggressive Federal Reserve monetary tightening, but was well off the previous day's peaks amid nervousness about what a gathering of finance ministers might say about its rapid appreciation.

The greenback added 0.36% to 128.335 yen, after soaring to a two-decade high of 129.430 on Wednesday as the Bank of Japan (BOJ) stepped in to the bond market for the third time in three months to defend its zero-percent yield target, drawing a stark contrast with the Fed's increasingly hawkish posture.

The dollar index - which measures the currency against six peers including the yen - ticked up 0.11% to 100.45, following its retreat in the previous session from a more than two-year peak of 101.03.

Also allowing the dollar to ease overnight, benchmark Treasury yields pulled back from the highest level since December 2018 at close to 3%, as dip buyers emerged. Those yields, though, also inched higher in Tokyo trading on Thursday.

"Few central banks will match the Fed this year for policy hikes and balance sheet retrenchment, making for a dramatic policy differential in the USD's favour," Westpac strategists wrote in a client note.

The dollar index "should remain bid in this environment, with talk of 101-102 likely to increase near term," they said.

San Francisco Fed President Mary Daly said on Wednesday she believed the case for a half-percentage-point rate hike next month is "complete" and "solid", adding to recent comments from other Fed officials backing bigger rate increases.

Markets are currently priced for half-point increases in both May and June.

By contrast, the BOJ on Wednesday offered to buy unlimited amounts of 10-year Japanese government bonds for four consecutive sessions as yields bumped against the 0.25% maximum leeway around its zero-percent target, showing its commitment to ultra-easing stimulus settings ahead of its policy meeting next week.

BOJ Governor Haruhiko Kuroda has stuck to the view that a weak yen is overall good for the economy, but admitted earlier this week that moves had been "quite sharp" and could hurt Japanese companies' business plans.

Finance Minister Shunichi Suzuki has been more categorical, saying on Tuesday that the damage to the economy from a weakening yen at present is greater than the benefits, in his strongest statement yet.

He is due to meet U.S. Treasury Secretary Janet Yellen this week on the sidelines of the Group of 20 financial leaders' gathering in Washington D.C., prompting traders to pare back bearish yen bets on the potential for stronger rhetoric on the currency.