Bank of Japan Begins Reversing Emergency Credit Measures

This is big, or maybe not.

The Bank of Japan on Friday began withdrawing emergency measures intended to liquefy credit markets during the crisis, NYT reports.

But, it did extend one major loan program. And, the key is whether, or not, BOJ attempts to sterilize its withdrawals. A sterilization at this point would mean that they add funds equal to what they withdraw. A non-sterilized withdrawal would of course mean draining funds from the system.

One hint that a sterilization may occur is the NYT reports that BOJ "emphasized that despite its withdrawal from credit markets, it would keep interest rates very low for as long as necessary."

In other words, they are taking money out of one pocket and putting it in another

Folks its time to start watching the Japanese money supply. It may take a month or more before we can get a true sense as to what the BOJ is up to, but it will obviously have repercussions, at a minimum, for the yen/dollar relationship and any remnants of the old yen related carry trade positions that may be lurking in the markets, if some,or all, of the withdrawals are not sterilized.

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