Asian shares ended in the red on Wednesday as cautious investors waited for crucial economic data from China later this week, while the yen's extended gains spurred profit taking in Japanese equities after their recent rally.
Fourth-quarter GDP and December industrial output, retail sales and house price data from China will be keenly watched on Friday by investors for clues on the health of the Asia's biggest economy.
The index shed 0.7 percent.
Japan's Nikkei share average fell 2.6 percent, its biggest one-day drop in eight months, as a rebound in the yen prompted investors to take profits on recent outperformers such as shares of exporters.
The index lost 278.6 points to 10,600.4, while the broader Topix shed 2 percent to 888.1.
GS Yuasa lost 4.5 percent, while Fuji Heavy, Mitsubishi Heavy and IHI were down between 2.9 and 4 percent. All Nippon Airways fell 1.6 percent.
Among exporters, Toyota Motor fell 2.6 percent, Canon dropped 4.1 percent and Fanuc shed 4.3 percent.
Heavyweight Fast Retailing also dragged, shedding 4.6 percent after Goldman Sachs downgraded the Uniqlo store operator, saying its earnings outlook was already sufficiently priced into the share price.
Mainland Chinese shares retreated from 7-1/2-month highs, dragged lower by real estate developers on renewed fears of broader property taxes. Data showing China's foreign direct investment inflows falling by a smaller percentage in December than the month before helped trim losses.
The CSI300 of the top Shanghai and Shenzhen A-shares closed down 0.7 percent at 2,577.1 points. The also shed 0.7 percent. Both fell off their highest levels since early June.
Kweichow Moutai sank 2.5 percent after the official Shanghai Securities News reported that the leading producer of premium Chinese white spirits has dropped sanctions on suppliers for reducing prices.
China railway counters, which carried strong 2012 gains into the new year, were also weaker with China Railway Construction dropping 1.6 percent.
Hong Kong shares retreated further from levels last seen in June 2011, as investors took profits on recent outperformers such as Chinese financials ahead of more China economic data at the end of the week.
The Hang Seng Index closed down 0.1 percent at 23,357 points. The China Enterprises Index of the top Chinese listings in Hong Kong ended down 0.8 percent at 11,907.5. This was both indexes' second-straight loss.
Investors rotated out of recent growth-sensitive sectors that have led the strong start to 2013 such as Chinese financials, railway and resources counters and into some consumer names. Chinese internet giant Tencent Holdings outperformed the broader market with a 3.5 percent jump.
Hong Kong property developers were broader higher after a policy speech by the territory's embattled leader Leung Chun-ying, that included plans to increase land supply to cool the property market. Sun Hung Kai Properties climbed 1.4 percent, but New World Development inched up 0.3 percent.
South Korean shares retreated as tech stocks were pressured by foreign selling and jitters about weakening smartphone demand.
The Korea Composite Stock Price Index fell 0.3 percent to close at 1,977.45 points, the lowest close in more than a month.
Tech giant Samsung Electronics closed down 1.3 percent. On Tuesday, it lost 2.6 percent. LG Display was down 1.6 percent after shedding 3.5 percent on Tuesday.
Daewoo Shipbuilding & Marine Engineering rose as much as 3.3 percent after it confirmed late on Tuesday it had submitted a bid for a project in the United Arab Emirates.
Being Asia's sole out performer, Australian shares advanced 0.5 percent, led by banks and defensives after Wall Street posted modest gains on the retail sales data.
The benchmark index rose 21.8 points to 4,738.4. The index closed 0.1 percent lower on Tuesday.
The financials sector helped lead the index higher, with top lender, the Commonwealth Bank of Australia up 0.9 percent.
Defensives finished the day stronger; blood products maker CSL surged 3.5 percent, Australia's top telecommunications provider Telstra jumped 1.1 percent.
(Read More: Will Lady Luck Return to Australia This Year?)
Building materials maker Boral shares surged 10 percent after announcing it is cutting 700 jobs as part of a company-wide restructure aimed at reducing costs and increasing its competitiveness.
New Zealand's NZX 50 closed down 0.04 percent at 4,169.2 points.
Both India's BSE Index and the 50-share NSE index ended down 1 percent.
Coming Up This Week:
THURSDAY: Santos & Iluka Q4 output, Australia December jobs report, TSMC earnings, Korea's December PPI
FRIDAY: China's Q4 GDP, fixed asset investment, industrial output & retail sales.