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TOKYO, Sep 4 (Reuters) The yen, which hit a record low against the euro last week, edged higher on Monday, cheered by solid capital spending data that made investors cautious about adding to already hefty bets against the Japanese currency.

The yen has struggled due to soft data on consumer prices and industrial output over the past two weeks that reduced market expectations for another Bank of Japan rate rise this year.

But the Japanese currency received some reprieve this session after a government survey showed Japanese firms increased capital spending by 16.6 percent in the April-June quarter compared with a year earlier, traders said.

Another yen supportive factor was the fact that speculators have already piled up a large amount of short positions in the currency, suggesting that the yen could get a lift if traders decide to unwind positions.

''From the standpoint of the supply and demand balance, I think the consensus view is that the market will head toward yen strength if things start to move,'' said a dealer for a major Japanese bank.

The dollar stood at 116.66 yen as of 0309 GMT, down from around 117.10 yen in late U.S. trading on Friday and off a six-week high of 117.50 yen hit on electronic trading platform EBS last Thursday.

The yen also edged higher against the euro, which stood at 150.05 yen down from around 150.30 yen in late U.S. trading on Friday and off a record high of 150.73 yen struck on Thursday on EBS.

The euro was firmer against the dollar at $1.2859 Data released on Friday showed that International Money Market currency speculators upped bets against the yen to record highs in the week to Aug. 29, with net short yen positions rising to 88,329 contracts worth $9.46 billion.

Traders said trading activity was light ahead of a Labor Day holiday in the United States on Monday.

RATE EXPECTATIONS Traders said the dollar looked vulnerable against the euro after Friday's U.S. jobs report failed to bolster expectations for a Federal Reserve rate rise at its policy meeting this month.

The dollar may also dip lower against the yen this week if comments by Bank of Japan Governor Toshihiko Fukui revive expectations for a BOJ rate rise in the coming months.

Such expectations receded after Japan's July nationwide core consumer price index -- issued on Aug. 25 for the first time under new calculations reflecting trends in household spending -- logged a softer-than-expected year-on-year rise of 0.2 percent.

''I wonder if it is proper to ... conclude that there will be no rate rise this year,'' said Kikuko Takeda, currency strategist at Bank of Tokyo- Mitsubishi.

''I think people should keep in mind the possibility this week that Mr. Fukui could set off a correction against all the excitement that took place based ... on the CPI,'' Takeda said.

Fukui is due to speak on Friday after a two-day BOJ policy meeting. The BOJ is widely expected to keep rates unchanged at 0.25 percent this week.

Data released on Friday showed that the U.S. economy generated 128,000 jobs in August, barely above median expectations of 120,000.

A Reuters poll taken after the release of the jobs data showed that just one out of 21 U.S. primary dealers expect the Federal Reserve to raise interest rates at its Sept. 20 meeting, after the central bank held rates steady at 5.25 percent in August, breaking a string of 17 consecutive rate increases.

By comparison, many market players expect the European Central Bank to raise interest rates two more times by the end of the year, to 3.5 percent, from 3.0 percent now.

REUTERS KR RAI0947