USD/JPY is trading up a half a percent in the 146.90s on Monday as the US Dollar (USD) continues its recovery from the late August lows, whilst the Japanese Yen (JPY) treads water. The US Dollar’s bounce gained some impetus after the release of July’s US Personal Consumption Expenditures (PCE) Price Index on Friday. The PCE is the Federal Reserve’s (Fed) preferred inflation gauge. The data showed that US inflation remained unchanged compared to the previous month and helped reassure investors that the US economy was probably not deccelerating as quickly as some had feared. In a “soft-landing” scenario the US Dollar is likely to hold its strength better than if the economy crashes. USD/JPY may see its gains capped, however, as the JPY finds support from a run of strong data out of Japan. Capital expenditure by Japanese companies expanded by 7.4% in the second quarter, marking the thirteenth consecutive quarter of growth, data showed on Sunday. Jibun Manufacturing PMI, meanwhile, was revised up to 49.8 from 49.5 in August, moving closer to 50 above which it would mark expansion.Data out last week further increased the chances of the Bank of Japan (BoJ) raising interest rates in the coming months, a move that would support the Japanese Yen by increasing foreign capital inflows. Annual flash Tokyo CPI ex fresh food for July came out at 2.4% compared to 2.2% in the previous month and beating expectations of 2.2%, according to data from the Statistics Bureau of Japan on Thursday. The Tokyo data suggested that Japan-wide inflation could show a similar rise.Japan employment data, however, was not as strong. The Japanese Unemployment Rate unexpectedly rose to 2.7% in July from 2.5% in June. Analysts at Capital Economics, however, dismissed the rise in unemployment saying “our conviction that the Bank (BoJ) will press ahead with another rate hike is growing.” “The jump in the unemployment rate in July is a lagged response to the weakness in economic activity around the turn of the year,” said Marcel Thieliant, Head of Asia-Pacific at Capital Economics. US employment data key for USD/JPYUnlike the Yen, employment data could be key for the Dollar, however, after the Fed Chairman Jerome Powell highlighted risks to the labor market in his pivotal speech in Jackson Hole. Popwell stated that the risks to the labor market now outweighed risks from high inflation. The week ahead sees a batch of US employment metrics released that will provide more detail on how bad the US employment situation is. These include ADP Employment Change, Initial and Continuing Jobless Claims and the main event – the US Bureau of Labor Statistics Nonfarm Payrolls (NFP) report for August, released on Friday. If US employment data paints a negative picture of the labor market in the US it could prompt a sell-off in USD/JPY as the Dollar depreciates from traders pricing in steeper interest rate cuts from the Fed. Currently the probabilities of the Fed making a large 0.50% cut at their September 18 meeting are still only about 30% with a 0.25% cut fully priced in, however, weak employment data could increase the chances of a larger cut with negative effects on USD pairs. More By This Author:AUD/USD Price Forecast: Price Is At A Crossroads – Is It Correcting Or Reversing Lower? EUR/JPY Rises After Eurozone Inflation Data Lands As Forecast Gold Rises On Nvidia Disappointment, Revival Of China Demand