USD/JPY softens below 157.50 amid holiday season in Japan

• USD/JPY weakens to around 157.30 in Friday's Asian session, losing 0.21% on the day. 
• Japanese authorities warned about intervention against excessive FX moves.
• Fed signalled a slower pace of rate cuts, which might lift the USD in the near term.

The USD/JPY pair edges lower to near 157.30 during the Asian trading hours on Friday. The verbal intervention from the Japanese authorities provides some support to the Japanese Yen (JPY). However, the uncertainty surrounding the Bank of Japan's (BoJ) policy outlook might cap the JPY's upside. Markets in Japan are closed for the rest of the week. Traders brace for the US ISM Manufacturing PMI for December, which is due later on Friday. 

Traders will closely monitor any potential foreign exchange (FX) intervention by Japanese officials to prevent the JPY from depreciating. Japan Finance Minister Katsunobu Kato last week reiterated concerns over a sliding yen, repeating his warning to take suitable measures against excessive foreign exchange movements.

The BOJ will publish its quarterly report on regional economic conditions next week, which will most likely include an assessment of whether wage hikes are spreading throughout the nation. This report might provide some insight into the BoJ's next policy decision on January 24.

On the other hand, the speculation of fewer Federal Reserve (Fed) interest rate cuts in 2025 and optimism around the US economy could lift the US Dollar (USD) broadly. The US central bank indicated that it will be more cautious in rate reductions as inflation remains stubbornly above its 2% annual target and the economy remains strong. Furthermore, policies by the US. president-elect Donald Trump are also expected to boost growth and potentially trigger inflation, which might slow the pace of Fed rate cuts.