USD/JPY surges to near 154.40 as US Trump claims victory over Democrats

• USD/JPY soars to near 154.40 as US Trump declares victory and is on course to take the Senate.
• Investors will shift focus to the Fed's monetary policy meeting on Thursday.
• The BoJ would struggle to tighten its interest rate policy further.

The USD/JPY pair refreshes a four-month high near 154.40 in European trading hours on Wednesday. The asset strengthens as the US Dollar (USD) outperforms its rival currencies with the victory of Republican candidate Donald Trump in sight. The US Dollar Index (DXY), which tracks the Greenback's value against six major currencies, climbs above 105.00.

According to the Associated Press, Donald Trump has already won three out of seven major battleground states of North Carolina, Pennsylvania, and Georgia and leading over Democratic rival Kamala Harris in the rest.

Market experts see Trump's victory as favorable for the US Dollar for a longer-term horizon. Trump vowed to hike tariffs by 10% on imports, except from China which is expected to face even higher and lower corporate taxes. A scenario that will boost domestic investments, employment, and overall demand, which will prompt upside risks to inflation.

Meanwhile, Trump has declared victory after gaining an undefeatable lead, according to BBC News. With Trump's victory seeming assured, investors will shift focus to the Federal Reserve's (Fed) monetary policy decision, which will be announced on Thursday. The Fed will cut interest rates by 25 basis points (bps) to 4.50%-4.75%, according to the CME FedWatch tool. Investors will pay close attention to Fed Chair Jerome Powell's interest rate guidance after Trump's victory.

In Japan's region, an absence of specific interest rate hike plans in the Bank of Japan (BoJ) policy meeting minutes of October 31 has weighed on the Japanese Yen (JPY). "We will scrutinize data available at the time at each policy meeting, and update our view on the economy and outlook in deciding policy," BoJ Governor Kazuo Ueda said in the monetary policy statement after leaving interest rates unchanged at 0.25%.

The BoJ appears to be incapable of further policy tightening as Trump's victory is expected to impact Japan's export sector.