USD/JPY hovers near 144.00, weighs down by growing expectations of Fed rate cuts

• USD/JPY depreciates as the Japanese Yen rises due to Japan's industrial Production rising 0.5% MoM in May.
• Japan's Ryosei Akazawa said that he will continue efforts to reach an agreement with the United States.
• The US Dollar struggles due to rising odds of the Fed initiating rate cuts in September.

USD/JPY edges lower after losing recent gains registered in the previous session, trading around 144.20 during the European hours on Monday. The pair holds losses as the Japanese Yen (JPY) probably receives support following the preliminary Japan's industrial Production release, which climbed by 0.5% month-over-month in May, recovering from a 1.1% decline in April. However, the industrial Production figures missed market forecasts of a 3.5% growth, as elevated US tariffs continued to cloud the outlook.

On Monday, Japan's top trade negotiator, Ryosei Akazawa, noted that he will continue working with the United States (US) to reach an agreement while defending national interests. Akazawa mentioned that he is aware of President Trump's comment to decline to discuss on auto. It was unfortunate I couldn't meet Bessent this time.

Additionally, the USD/JPY pair also struggles due to a weaker US Dollar (USD), driven by the strengthening expectations of the Federal Reserve (Fed) cutting interest rates at the September meeting. On Friday, the President of the Federal Reserve Bank of Minneapolis, Neel Kashkari, noted that he was sticking to his view that cooling inflation would allow the Fed to cut its policy rate twice that year, beginning in September.

On the data front, the US Personal Consumption Expenditures (PCE) Price Index climbed by 2.3% year-over-year in May, up from the 2.2% rise in April (revised from 2.1%). This reading came in line with market expectations. Meanwhile, the core PCE Price Index, which excludes volatile food and energy prices, rose 2.7%, following the previous 2.6% increase (revised from 2.5%). Traders will likely observe US labor market data scheduled to be released later this week to gain further impetus on the US Federal Reserve's (Fed) policy outlook.