USD/JPY holds below 158.00 after Tokyo CPI inflation data

• USD/JPY loses momentum to around 157.75 in Friday's early Asian session. 
• Tokyo CPI rose 3.0% YoY in December vs. 2.6% prior. 
• Fed signaled a slower pace of rate cuts, which might underpin the US Dollar. 

The USD/JPY pair loses traction to near 157.75 during the early Asian session on Friday. The Japanese Yen (JPY) edges higher after the Tokyo Consumer Price Index (CPI) inflation data. Trading volumes are likely to be low ahead of the next week's New Year holiday.

Data released by the Statistics Bureau of Japan on Friday showed that the headline Tokyo CPI inflation climbed to 3.0% YoY in December from 2.6% in November. Meanwhile, the Tokyo CPI ex Fresh Food, Energy arrived at 2.4% YoY in December versus 2.2% prior. The Tokyo CPI ex Fresh Food rose 2.4% YoY in December against 2.5% expected and up from 2.2% in November. The reading is likely to keep the Bank of Japan (BoJ) on track for a January interest rate hike.

BoJ Governor Kazuo Ueda said last week that the central bank expects the Japanese economy to move closer to sustainably achieving the BoJ's 2% inflation target next year. "The timing and pace of adjusting the degree of monetary accommodation will depend on developments in economic activity and prices as well as financial conditions going forward," said Ueda.

On the USD's front, the expectation of fewer rate cuts by the US Federal Reserve (Fed) could support the Greenback in the near term. The Fed cut interest rates by a quarter point in the December meeting and projected just two rate cuts in 2025, down from its original forecast for four.