USD/JPY continued to trade near recent highs. Opposing forces of fiscal concerns, delayed BOJ policy normalisation, risk sentiments and intervention risks should continue to drive the pair. USD/JPY last seen at 154.75 levels, OCBC's FX analysts Frances Cheung and Christopher Wong note.

Two-way trades are quite likely

"Last week, PM Takaichi signalled her intent to ramp up the active use of fiscal policy to power economic growth by dropping an annual budget-balancing goal. She said that the government’s long-held target of achieving a primary balance surplus will no longer be reviewed on a single-year basis. She made mention of multi-year budgets and also favour net debt to GDP."

"This may imply that government can issue bonds with greater ease, to finance bigger fiscal spending targeted to boost growth. Risk of heavier fiscal burden amid rise in debt servicing cost and worries of lack of fiscal discipline can undermine JPY in the interim."

"Daily momentum and RSI indicators are flat for now. 2-way trades likely. Resistance at 155.10, 156 levels. Support at 153.20 (21 DMA), 151.60 (61.8% fibo retracement of 2025 high to low)."