Big week for Japan with data suite, BOJ

This week in Asia

Japan's economy is in the spotlight in Asia's business calendar this week as investors look to a suite of economic indicators for signs of recovery following a sales tax hike earlier this year.

Japanese retail sales, industrial output, consumer prices, employment and household spending for the month of September are due, alongside a Bank of Japan meeting.

Furthermore, the country's corporate earnings season is in full swing with heavyweights Canon, Honda Motor, Mitsubishi Motors, Toshiba, Nintendo and Sony reporting this week.

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Investors will also be combing through the monetary policy decision by the Federal Reserve following its two-day meeting this week, specifically if the central bank removes the phrase 'considerable period' for keeping funds rate low in its statement.

"My personal belief is that it [the Fed] will continue to see rates staying low for a considerable period of time and remain confident in its economic outlook, thus sending a message of confidence to the market," said Chris Weston, chief market strategist at IG in a note.

"This should also be USD positive; especially given the ballooning divergence between market pricing and the Fed's own central projections," he added.

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Tomohiro Ohsumi | Bloomberg | Getty Images

Japan data previews

Japan begins its data release with retail sales figures on Tuesday. After August sales beat expectations to rise 1.2 percent on year, Moody's Analytics is expecting a similar 1 percent increase in September.

"Retail sales have improved at a modest pace since the tax‐induced drop in April sales. But with sentiment faltering and real wages falling, we are unlikely to see consumer demand increase much in the coming months," economists said in a note. Real wages fell 2.6 percent on year in August.

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On Wednesday, industrial output is due before the Tokyo market open. Production fell 1.5 percent on month in August, but Moody's is anticipating a rebound of 2.5 percent on the back of strong export. Figures released last week showed exports jumping to a seven-month high in September.

The firm's optimism goes against the general gloom. Last week, the government cut its view on industrial output for the first time in five months, citing higher inventory and weak demand.

Why Japan is still the market to be in

Consumer price inflation on Friday is widely expected to stay above 3 percent, a tad shy of the 3.1 percent increase in August. Meanwhile, household spending will likely remain in contraction territory after tanking 4.7 percent on year in August with analysts citing a 5.2 percent annual decline in real disposable income during August.

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Eyes on BOJ

Japan's central bank holds a one-day meeting on Friday, its second this month, to update its economic forecasts.

According to Reuters, the BOJ is preparing to roughly halve its 1 percent growth forecast for this fiscal year and maintain its view that inflation will hit 2 percent in the year beginning April 2015.

Elsewhere in the region

Quarterly earnings from major Chinese financials will be in the spotlight throughout the week withAgricultural Bank of China, Bank of China, China Merchants Bank and ICBC reporting in Hong Kong and Ping An Insurance in Shanghai.

In South Korea, LG Electronics will report results for the July-September period on Wednesday.