China's benchmark index hit a new one-month low after HSBC's flash purchasing managers' index (PMI) for December fell to 50.5, compared to 50.8 in November. Still, the index was above the key 50-line for a fifth straight month.
Financials led the losses Citic Securities down 2 percent and Minsheng Bank down 1 percent after the nation's securities regulator said it will not involve itself in IPO pricing when the current freeze on listings ends next year. Instead, it will allow the market to take the lead in pricing assets.
Automakers declined after the city of Tianjin announced that it will impose quota on new car plates starting next Monday in a move to curb car ownership and restrict traffic. Changhai Auto slumped 6 percent while SAIC Motor fell over 5 percent.
Nikkei 1.6% lower
A stronger currency tempered optimism over upbeat economic data for Japanese investors, leading the benchmark Nikkei to close at its lowest level in nearly a month.
Dollar-yen fell below the 103 handle, retreating further from last week's five-year peak, which led investors to sell off blue-chip and currency-sensitive exporter stocks. Index heavyweight SoftBank lost 3 percent while Sharp, Nissan and Honda fell over 2 percent each.
"Just because the yen is weak doesn't mean companies who have already lost their competitive advantage to Asian or overseas exporters get it back. We've been quite cautious on Japanese exporters even as the yen has been weakening," said Nicholas Weindling, fund manager at J.P. Morgan Asset Management.
Released just before the market open, business sentiment in Japan among big manufacturers rose to its highest level in six years in the three months to December, the closely-watched Tankan survey showed.