Come on G-20, Cut Japan Some Slack

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Japan's economic policies, which have driven down the yen's value and given local exporters a powerful boost, are expected to be in the firing line at a meeting of G-20 finance ministers. But perhaps it's time to cut Japan a little bit of slack, some analysts say.

Policymakers from Asia and Europe have stepped up criticism of Japan, where expectations for aggressive monetary easing have pushed the yen down 15 percent against the dollar over the past three months. The yen has shed 20 percent of its value against the euro and fallen 13 percent versus South Korea's won over the same time period.

While the yen has fallen sharply and quickly, its weakness should be seen in the context of a period of prolonged strength, said Vasu Menon, vice president for wealth management at OCBC Bank.

"The yen is weakening from a position of extreme strength," he told CNBC Asia's "Squawk Box." "So, I think the G-20 will cut Japan some slack."

The G-20, a forum of developed and emerging market nations for the most important global economic and financial issues, kicks off a meeting in Moscow on Friday.

"Japan is still the world's third largest economy – this is a point that the media and the markets are not talking enough about," Menon said. "Japan has been in the doldrums for the past two decades… If it's able to revive itself that's in everyone's interest.

Data released on Thursday showed Japan's economy remained in recession in the final three months of last year.

(Read More: Why You Should Look Past Japan's GDP Miss)

The yen may have fallen sharply in recent months, but it's a different story when viewed in the context of recent years. In the past five years, the yen is about 13 percent stronger against the greenback. Compare that with other major currencies: the euro has depreciated about 16 percent against the dollar over the past five years while sterling is down about 20 percent.

"In Japan's defense, what they (policymakers) are trying to do is fight deflation and revive economic growth, so if they do this by increasing their balance sheet (via monetary stimulus) a by-product of that will be a weaker yen," said Jonathan Cavenagh, senior FX strategist at Westpac Bank in Sydney, adding that the G-20 would probably shy away from making any accusations about "currency manipulation."

"Obviously, there will be some accusations thrown from the sidelines of the meeting," he said.

Let's Fight

Russia's finance minister on Thursday added his voice to the heated currency debate, saying that countries "should not be competing through their currency policies."

(Read More: Russia: Don't Compete Through Currency Devaluations)

Some analysts believed the G-20 meeting could mark an intensification in a global "currency war" – a term now used widely to describe deliberate policy action by countries to bring about a fall in their currency that boosts exports and in turn economic growth.

An ultra-lose monetary policy in the U.S. in recent years, for example, has put pressure on the dollar to weaken.

"The comments from Russia are in spirit with the BRICs' (Brazil, Russia, India, China) position, which for some time has been that the G-7, particularly the U.S. has been manipulating its currency. And that argument can also be made of Japan," said Michael Woolfolk, senior currency strategist at BNY Mellon in New York.

"What is this going to get us at this G-20 meeting? I don't think Russia and the BRIC nations are going to get what they are after. However, I think we do get a consistent G-20 statement but this will mark the beginning of an escalation in currency wars," Woolfolk said.

He believes the yen is likely to weaken to the 100-mark to the dollar by year-end.

(Read More: Is the G20 Meeting Being Wrecked Before It Starts?)

—By CNBC.Com's Dhara Ranasinghe; Follow her on Twitter @DharaCNBC