USD/JPY softens to near 149.50 as US PCE data reinforces Fed dovish bets

• USD/JPY edges lower to near 149.50 in Monday's early Asian session. 
• US core PCE inflation steadied at 2.9% YoY in August as expected. 
• Expectations that the  BoJ might delay rate hikes could undermine the Japanese Yen. 

The USD/JPY pair loses ground to around 149.50 during the early  Asian session on Monday. The US Dollar (USD) softens against the Japanese Yen (JPY) as the US Personal Consumption Expenditures (PCE) Price Index indicated the Federal Reserve (Fed) is keeping the central bank on pace for interest rate reductions ahead. Traders await the Fedspeak later on Monday for fresh impetus. 

Data released by the US Bureau of Economic Analysis on Friday showed that the US PCE rose 2.7% YoY in August versus 2.6% in July. This figure came in line with the market expectation. The core PCE Price Index, which excludes volatile food and energy prices, climbed 2.9% YoY in August, matching July's increase and analysts' estimate. On a monthly basis, the PCE and the core PCE increased 0.3% and 0.2%, respectively. 

Though the US central bank targets inflation at 2%, the reports are unlikely to change course for policymakers who last week indicated they see two more 25 basis points (bps) rate cuts before the end of the year. Markets are strongly betting on a rate reduction in October, though there's a bit less enthusiasm for another move in December. Fed Chair Jerome Powell indicated a lot will depend on upcoming economic data.

On the other hand, political uncertainty in Japan might weigh on the JPY and create a tailwind for the pair. Japan's Liberal Democratic Party (LDP) leadership election will take place on 4 October and the outcome could delay the next interest rate hike by the Bank of Japan (BoJ) if a candidate with dovish views is selected.