Goldman Sachs analyst Karen Reichgott Fishman noted in a research report that the fiscal implications of the ruling coalition's overwhelming victory in Sunday's lower house election may not yet be fully reflected in the USD/JPY exchange rate.

She stated, "A stronger governing foundation could heighten market concerns over the fiscal spending trajectory. If the Bank of Japan does not shift toward faster interest rate hikes, Japanese government bonds and the yen may weaken further."

The analyst suggested that as markets gradually digest the election outcome and the popular mandate received by Prime Minister Sanae Takaichi, the USD/JPY pair could approach and potentially break through the 160 level.

However, she added, "If Japanese authorities curb this movement through currency reviews or actual intervention, the trend may be difficult to sustain or even interrupted."