The benchmark index traded in positive territory after the Chinese central bank soothed investor worries of rising inflation by saying that it would increase policy flexibility to support the economy.
Major banks like Bank of China and ICBC were flat ahead of loan growth and money supply data for April. Reuters expects new loans to fall to $123 billion in April from March's figure of $158 billion.
Meanwhile, energy stocks were in focus after the government announced a price hike of retail gasoline prices. Asia's largest oil refiner Sinopec slipped as much as 1 percent.
Kospi Down 1.5%
As the yen accelerates its pace of decline, South Korean exporter stocks suffered with automakers leading losses. Hyundai Motor and Samsung Electronics fell over 2 percent each while Kia Motors tanked 3 percent.
A depreciating yen boosts the value of repatriated foreign income for Japanese exporters, thereby hurting the competitive edge of Seoul firms.
The benchmark index has given up all of the previous day's gains and is now down 2 percent since last week's one-month high of 1,984.
— By CNBC.com's Nyshka Chandran. Follow her on Twitter @NyshkaCNBC