After months of watching its economy and currency suffer as they led the world in a global slowdown, Japan made its first move toward recovery today by announcing a significant monetary easing policy to help stimulate the ailing country.


Policy Board

announced that it will increase the country's money supply, in effect pushing interest rates to zero. The

Bank of Japan

also said that it would participate in a large-scale buyback of government bonds.

The increase of money supply will grow the levels of money able to be loaned by banks, now at a very cheap price (effectively free). It's hoped this will stimulate investment enough to stem the growing economic misery that Japan has been experiencing for quite a while.

"This is a radical shift in the monetary policy regime," said Jason Bonanca, currency strategist at

Credit Suisse First Boston

. Still, he thinks, this may not be enough. "The

greater magnitude expected is shown by the lackluster response."

In comments after the policy shift was announced this morning,

Masaru Hayami

, the Bank of Japan governor, said there is no need for the government to push the yen lower, and that the rapid decline in value of the yen could have detrimental spillover effects, hurting other Asian countries. He added that there would be no intervention on the part of either Japan or the U.S. to guide the yen lower, and that currency prices should be left up to market forces. Bonanca noted that both the policy and commentary this morning is "significantly bearish" for the yen.

In response to the action and the commentary of the morning, the yen has made minimal gains against both the dollar and the euro. It was a "buy the rumor, sell the fact" situation, said Bonanca, indicating that the limited response was due to the expectations of a policy shift already being priced into the markets.

The dollar was most recently trading for 122.08 yen per dollar, down from Friday's close of 122.97 yen.

As for any effect of Japan's move on the U.S. equity markets, which fell sharply last week, Bonanca opined that "it boosts sentiment. Traders had seized on the idea of Japan sliding into the abyss -- today could shift that." He added, though, that it will likely have a "limited effect."

"There's nothing in their economy that argues against the lower level of the yen, just against the rapid decline," Bonanca said. He expects that there will be further depreciation of the yen in the future. CSFB set its 12-month target at 135 yen per dollar.

The euro was also losing a little bit of value to the yen this morning. The euro was trading most recently at a level of 109.89 yen per euro, down slightly from its last close of 110.22 yen.

The rest of the currency markets is slightly overshadowed by the news out of Japan, but in net effect the dollar is losing value across the board. After a week of strong gains by the dollar, repositioning and a bit of profit-taking are skimming value off of the dollar in trading against the other major currencies.

"The euro is coming into an area where the market is getting a little overbearish," said Bonanca.

With an interest rate cut by the

Fed expected tomorrow, the dollar could get some short-term support against the euro, but a euro recovery is expected after that.

Analysts are nearly evenly divided between expectations of a 50- and 75-basis-point cut when the

Federal Open Market Committee convenes tomorrow.

The euro was most recently trading at $0.9001, up slightly from its last close of $0.8972 on Friday.

The Australian dollar has lifted itself off a series of all-time new lows against the U.S. currency last week. The Australian currency has recently been spiraling downward, following the global trend and largely connected to the pitiful Japanese economy. Today though, the Aussie buck has been lifted a bit higher, most recently trading for $$0.5007, up from $0.4946 at last close.

The British pound is slightly higher in early U.S. trading, remaining a quiet participant in the somewhat volatile markets in the past weeks. The pound was most recently at $1.4312, up slightly from $1.4296 at Friday's close.

The Canadian dollar is still mired near 2 1/2 year lows against its U.S. counterpart, resultant of expectations of an aggressive interest rate cut in the U.S. tomorrow. The Canadian dollar was still recently up on the U.S. dollar relative to its last close. The U.S. buck was trading recently for C$1.5657, down marginally from C$1.5684 on Friday.