This week in Asia: Central banks, trade data in focus

Bank of Japan headquarters in Tokyo
Yuriko Nakao | Bloomberg | Getty Images
Bank of Japan headquarters in Tokyo

Asian markets are likely to focus on a string of monetary policy decisions, as central banks in Japan and Indonesia hold their monthly policy meetings this week.

The Bank of Japan (BOJ) will conclude a two-day meeting on Friday and is expected to leave its monetary policy unchanged following governor Haruhiko Kuroda's comments last week that the yen is unlikely to depreciate further.

"BOJ governor Kuroda's comments suggests the central bank is comfortable with the dollar-yen exchange rate around 125," Moody's Analytics said in a note issued last week. "Overall, the 2 percent inflation target is some way off thus further easing may still be necessary."

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Meanwhile, Bank Indonesia (BI) will likely stand pat on monetary policy as the central bank has little room to cut rates further, unlike its regional counterparts.

"The disinflation trend is fading as the rupiah is depreciating and oil prices are rising, but the economy isn't healthy. With U.S. monetary policy normalization expected later this year, BI will be reluctant to cut rates for fear of stoking currency volatility," Moody's analysts said.

ING Financial Markets' head of research Asia, Tim Condon, expects BI to lower interest rates later this year: "We forecast a 25 basis points rate cut to 7.25 percent in December and 225 basis points to 5.00 percent in 2016."

Meanwhile, minutes from the Reserve Bank of Australia's (RBA) previous policy meeting will be revealed on Tuesday and markets will be examining it closely for the "extent of the RBA's easing bias," said Shane Oliver, head of investment strategy and chief economist at AMP Capital Investors. The central bank kept interest rates steady at a record low 2.0 percent, in line with analysts' expectations, on June 2.

Data releases

The region also gets a pulse check on trade over the course of the week, with May data due in Japan, Indonesia and India.

For the world's third-largest economy, trade balance could post a deficit of 260 billion yen last month, according to estimates from Moody's Analytics. up from 53.4 billion yen in April.

"Exports are still growing strongly from a year earlier, as the weaker yen and stronger U.S. demand boosts machinery, tech and auto shipments. Imports are declining on falling oil prices though the pace is easing," analysts from Moody's wrote.

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In India, the wholesale price index (WPI) for May is also on tap this week, while New Zealand will receive its first-quarter growth report card on Thursday.

Lastly, China's house price index is expected to show the country's all-important property sector emerging from the doldrums, thanks to the authorities' aggressive monetary easing.

According to a report by the China Index Academy (CIA), the average price of a new home in the mainland's 100 major cities rose 0.5 percent month-on-month in May, marking the first growth in prices since February.