In a dramatic overnight reversal of policy, the Bank of Japan today took back the Y1,600 billion (£6.7 billion) of cash it had pumped into the financial system between Friday and Monday to offset the credit crisis caused by the US sub-prime panic.

The sudden liquidity drain comes as Asian markets have begun to stabilise, rising slightly today as investors’ worries over sub-prime subsided.

Trading floors reported a “cautious edging” back into blue-chip equities oversold during the previous week’s mayhem.

The Japanese central bank’s move follows a surprise double-collapse in Japan’s overnight call rate, which tumbled to only 0.06 per cent.

That sharp drop put the rate substantially below the BoJ’s target of 0.5 per cent and, said central bank officials, was a sign that more liquidity than necessary had been injected into the market in recent days.

The BoJ, as a gesture of solidarity with the European Central Bank and US Federal Reserve and with Asian stock markets in freefall, flooded the financial system with Y1 trillion of liquidity last Friday and a second tranche of Y600 billion on Monday.

Today’s move, said Masuhisa Kobayashi, an economist at Barclays Capital, clearly shows that the liquidity injections by the BoJ were more symbolic than a response to a genuine credit crunch in Japan.

When the BoJ’s morning liquidity draw today failed to stop the sagging overnight call rate, the central bank then reversed Friday’s injection with a further withdrawal of Y1 trillion worth of cash from the system.

Money markets remained doubtful that Japan was in the jaws of a credit-crunch: even after the BoJ move, the call-rate hovered around just 0.2 per cent.

The move, said analysts, also signals the central bank’s growing confidence that Japan – along with the rest of Asia – may be substantially better insulated from the US sub-prime lending fallout than previously thought.

New analysis of the Japanese financial system suggests that, among them, the nation’s largest banks probably have a total sub-prime exposure of around Y1 trillion – a figure, said Mr Kobayashi, that could be easily absorbed without doing noticeable damage to the megabanks.

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