TOKYO - Japan is expected to increase the amount of government bonds sold in regular auctions to around 173.5 trillion yen ($1.15 trillion) for the fiscal year ending in March 2025, up from the initially planned 171 trillion yen, three sources familiar with the matter told Reuters.

The increase will be made to fund a 13.9 trillion yen stimulus package aimed at cushioning the blow to households from rising living costs.

The Ministry of Finance (MOF), which oversees the debt programme, will increase the issuance of Treasury Discount Bills due to strong market demand for the notes, the sources said.

There will be no change to the amount of interest-bearing government bonds sold to the market, said the sources who requested anonymity as they were not authorised to speak publicly.

The government will announce the revised bond issuance plan by Friday, together with a supplementary budget for the current fiscal year.

Contrary to other advanced nations that have phased out crisis-mode stimulus, Japan continues to compile big spending packages to underpin a fragile economic recovery.

Including debt issued to roll over maturing bonds, the outstanding balance of Japanese government bonds (JGB) has ballooned to 1.1 quadrillion yen - twice the size of Japan's economy and the largest among advanced nations.

($1 = 151.4800 yen)

(Reporting by Takaya Yamaguchi, writing by Leika Kihara; Editing by Saad Sayeed)