USD/JPY edges higher above 147.00 despite Fed rate cut hopes

• USD/JPY gains traction to near 147.20 in Monday's early Asian session.
• Japan's Tokyo CPI inflation eases in August. 
• US PCE stayed higher than the Fed's target in July, but it didn't dash traders' hopes for a rate cut.

The USD/JPY pair gains ground to around 147.20 during the early Asian session on Monday. The Japanese Yen (JPY) softens against the US Dollar (USD) as cooling inflationary pressures in Japan undermine bets of one more interest rate hike by the Bank of Japan (BoJ) this year. Traders await the US ISM Manufacturing Purchasing Managers Index (PMI) report later on Tuesday ahead of highly anticipated US Nonfarm Payrolls (NFP) data. 

Inflation in Japan, as measured by the Tokyo Consumer Price Index (CPI), grew at a moderate pace in August. The headline CPI  rose 2.5% YoY in August against a 2.9% rise seen in July. Meanwhile, Tokyo CPI ex. Fresh Food climbed by 2.5%, as expected, slower than the previous reading of 2.9%. Signs of cooling inflation prompted traders to reduce bets on a BoJ rate hike, which might weigh on the JPY against the USD in the near term. 

On the USD's front, the US Personal Consumption Expenditures (PCE) report released on Friday showed that US inflation held steady in July but remained above the Federal Reserve's 2% target. Traders priced in a higher chance for a Fed rate cut at the September meeting after the PCE inflation data. This, in turn, might undermine the Greenback against the JPY. 

Traders will take more cues from the US employment report later on Friday. The upcoming US NFP report for August could influence the Fed's decision-making. The US economy is expected to see 78,000 job additions in August, while the Unemployment Rate is projected to tick higher to 4.3% during the same report period.