Barclays economists warn that the Japanese yen could remain under pressure due to Prime Minister Sanae Takaichi’s Abenomics-style policy bias. In their quarterly outlook, they note that her administration is considering further fiscal expansion and has already lowered the government’s long-held target for achieving a primary balance surplus. They add that fiscal risks could intensify if Takaichi calls and wins an early snap election, strengthening her mandate for more expansionary economic measures.

Given the currency’s sensitivity to fiscal policy, Barclays expects continued yen weakness and recommends staying long on USD/JPY. The bank has raised its long-term USD/JPY target to 158.8 from the previous 155.0, while the pair was recently trading around 155.03.