The tacit endorsement of Japan’s monetary easing by finance chiefs of the Group of 20 is expected to further make Japan’s exchange rates to the dollar competitively higher, while adversely affecting Korea’s won and exports, analysts said Monday.

The G20 finance ministers did not directly criticize Japan’s easy-money policy that has recently boosted the pace of Japan’s yen depreciation through the central bank’s bond-buying scheme, in line with Prime Minister Shinzo Abe’s plan to revive its economy.

Its communiqu after the meeting stated that “Japan’s recent policy actions are intended to stop deflation and support domestic demand,” saying that its move along with South Korea’s macroeconomic policy package, including its supplementary budget and housing market revitalization plans, was part of steps to “stimulate activity.”

They reiterated their February position in favor of a market-determined exchange rate, rather than targeting currency devaluation.

Japan’s Finance Minister Taro Aso said during the G20 finance meeting that Japan sided with the global fundamental principle of resisting protectionism and keeping markets open, while avoiding competitive exchange rate targets.

The communiqu continued that the G20 would closely monitor any “unintended negative side effects stemming from an extended period of monetary easing.”

Analysts said that the yen’s weakness was likely to continue, and Korea would need to draw up measures to cushion possible side effects as the country may face further decoupling even though the U.S. economy is headed for recovery.

“Korea has to accept that the yen will get weaker, and inevitably has to come up with a set of measures that can buffer shocks from this,” said Lee Sang-jae, an economist at Hyundai Securities.

The Korean won against the dollar weakened to around 1,110 won on foreign sell-offs of local stocks, affected by North Korea’s bellicose standoff and a weak yen rather than the country’s economic fundamentals.

Kwon Goo-hoon, an analyst at Goldman Sachs, said, “The adverse impact of the yen devaluation on Korean net exports and investment ... suggests its overall adverse impact on Korean GDP beyond 2013.”

Korea’s automobile, auto parts, steel and machinery industries would be affected the most by the yen’s further weakening, the analyst said.

Emerging economies of the G20 expressed concerns over possible increased volatility in the foreign exchange markets stemming from credit expansion on monetary easing by advanced countries.

By Park Hyong-ki (hkp@heraldcorp.com)