The Bank of Japan siphoned ¥1.6 trillion from the financial system Tuesday after adding money for the previous two business days to anchor interest rates.
The central bank removed ¥600 billion at 9:20 a.m. and withdrew another ¥1 trillion almost four hours later. The BOJ had provided ¥1.6 trillion since Friday to rein in rates toward its target of 0.5 percent, joining U.S. and European central banks to help avert a crisis of confidence in global credit markets.
"The BOJ draining money means the situation is probably over the hump," said Susumu Kato, chief economist at Calyon Securities in Tokyo, one of the 25 primary dealers that are required to bid at government debt sales. "Central bankers globally have taken pre-emptive action to ease credit concerns."
Overnight rates between commercial banks in Japan fell to as low as 0.225 percent Tuesday, from 0.56 percent Friday, the highest in almost a month, according to Tokyo Tanshi Co.
"We thought draining funds would be appropriate because overnight call rates fell this morning," said Hirotaka Hideshima, who is in charge of money market operations at the BOJ. "We adjust funds while monitoring market rates. It's part of our regular operations."
The Reserve Bank of Australia added 2.61 billion Australian dollars ($2.2 billion) to its financial system Tuesday. The central bank has injected A$9.10 billion via so-called repurchase agreements to the banking system since Friday.
The European Central Bank lent emergency money to banks for a third day Monday. Central banks in the U.S., Europe, Japan and other nations have added more than $350 billion to the banking system in the past three business days.