I just finished it, and here is what I got out of that particular ending:
"Guide souls to where they belong"... Well, Makoto was living in the past, and Hiyori lost her soul in the past, so I believe that the place that their souls belonged was clearly the past.
So I believe that Izayoi did not "turn back time" but rather, just sent their souls back where they belonged, causing whatever happened in "the present" to simply not happen.
Or something. It's 1.45 AM over here, so my tired brain might've missed something.