MUFG Research discusses USD/JPY outlook and flags a scope for a move towards 160 on technical factors.

"Yomiuri is today reporting that the government is considering another supplementary budget to be compiled by November and passed through parliament by year-end. With the BoJ already priced for three hikes by July next year, front-end rates are unlikely to move higher on this speculation...The size of any supplementary budget will be important of course and it may well turn out to be small  but there is a risk it could feed into some renewed steepening of the JGB curve that tends to coincide with yen underperformance. Even if small in size it could still blur the lines on the government and the BoJ being in unison in fighting inflation risks," MUFG notes.

"A break of the 200-day moving average will open up the potential for renewed momentum in USD/JPY with the potential for a full retracement back to the 160-level from early in September and to levels where intervention speculation would likely resume," MUFG adds.