Nikkei Rallies 3% on Expected BOJ Stimulus

The Nikkei 225 surged 3 percent on Wednesday on expectations of aggressive monetary stimulus from the Bank of Japan's (BOJ) highly-anticipated policy meeting, while the rest of Asia fell on caution ahead of further risk events this week.

The Nikkei staged an impressive rebound after the previous day's near one-month low. Meanwhile, the Kospi pared gains to close down 0.1 percent, Australia's S&P ASX 200 retreated further from the 5,000 mark and the Shanghai Composite closed just above a fresh low for 2013.

The Bank of Japan is due to release a policy decision on Thursday, when it concludes its two-day meeting, which will likely influence risk appetite in Asia.

(Read More: Is Kuroda Emulating Bernanke?)

On tap for the week ahead, the European Central Bank holds its policy meeting on Thursday and monthly U.S. non-farm payrolls data are due Friday. The jobs report is key to the Federal Reserve maintaining its supportive policy stance.

Financial markets in China and Hong Kong will be shut on Thursday for a public holiday. Hong Kong will resume trade Friday while the mainland will re-open Monday.

Nikkei Outperforms

A near 14 percent surge in shares of Fast Retailing helped propel the Nikkei higher after the firm's Uniqlo clothing chain reported a 23 percent rise in same-store sales in March from the year before.

Central bank governor Haruhiko Kuroda is expected to substantially boost asset purchases on Thursday, as well as buy longer-dated government bonds and commit to the open-ended purchase of assets immediately

"This is a key meeting for yen bears who are expecting the announcement of more aggressive policy easing under new governor Kuroda. Much of this has been factored in so expectations are high for the new broom," said Kelly Teoh, market strategist at IG Markets in a note.

If Kuroda does satisfy markets on Thursday, the Nikkei may surpass last month's four-and-a-half-year high of 12,650 to test the 13,00 mark.

Greater China Mixed

The Hang Seng Index gave up earlier gains after touching a session high of 22,527 as the index fell 0.1 percent on weakness in consumer stocks.

Food distributor Tingyi fell 2.4 percent while China's top footwear retailer, Belle International lost 2 percent.

Strength in financials helped limit heavy losses in the mainland, after China Merchants Bank climbed nearly 2 percent after on news that regulators approved its acquisition of a 50 percent stake in insurer CIGNA-CMC. This sparked a sector-wide rally with Agricultural Bank of China rising 1.5 percent.

The Shanghai Composite touched a fresh low for 2013 at 2,219 points earlier in the session, but one trader says the benchmark will cross 3,000 by the year-end.

"What we're seeing is a technical correction. We have not yet hit a 10 percent correction in the market. We're looking for consolidation at the 2,200 level followed by a rebound. We will hit 3,500 by year-end," said Daryl Guppy, CEO of guppytraders.com.

Korea Pares Gains

Further tensions in North Korea capped gains on the Kospi, after Pyongyang said on Tuesday it would escalate nuclear weapons production.

In response, the won skidded to a six-and-a-half-month low against the dollar at 1,121, its lowest levels since September and has since strengthened to 1,117.

Heavy losses were capped by optimism on talk of an extended budget as part of the broader policy package offered by President Park Geun-hye's administration.

Australia Slips 0.6%

Australian shares moved off their lowest levels in nearly two weeks to close above 4,950 as investors shrugged off February's better-than-expected trade data.

Gold stocks weighed on Australia's main index, with Northern Star leading losses by 11 percent after the yellow metal lost 1.5 percent overnight.

The index hit a four-and-a-half year high of 5,163 on March 12 rising steadily since the start of December.