World Economy

Asia’s focus this week: Japan, Fed meeting

Pedestrians pass before a share prices board in Tokyo, Japan.
Yoshikazu Tsuno | AFP | Getty Images

After a slump in global stocks last week, data from Japan and China will likely top traders' watchlist this week as they seek more cues on the state of the global economy. Beyond Asia, investors will watch the Federal Reserve's policy meeting for any indication when it will begin to raise interest rates.

Japan data lineup

Over the weekend, Prime Minister Shinzo Abe won his snap election and his ruling Liberal Democratic Party (LDP) and coalition partner maintained a supermajority, according to media exit polls. Abe's decision to call for a snap election two years early is seen as a referendum not only on his decision to delay a sales tax increase but on Abenomics as a whole.

On Monday, the Bank of Japan's Tankan survey of the corporate sector showed sentiment among Japan's big manufacturers worsened in the fourth quarter, underscoring pessimism about the Japanese economy.

Trade data is scheduled for release on Wednesday at 0750 SIN/HK. A Reuters poll of 26 economists forecast exports to increase 7.0 percent in the year to November, with a 1.7 percent annual rise in imports.

The Bank of Japan will also have its monthly policy meeting this week and action around this meeting will "not be too big a surprise given the central bank's indirect role in Abenomics", noted IG market strategist Stan Shamu.

After securing a fresh mandate, what will Abe do?

China & rest of Asia

After a slew of softer-than-expected outcomes from China last week, upcoming data may help investors further gauge the health of the world's second largest economy following November's rate cut. The People's Bank of China reduced its benchmark interest rates for the first time in two years on November 21 as the country appear set for its slowest full-year growth since 1990.

The November house price index will be released on Thursday, but investors are bracing for a weak result. A report from the China Index Academy (CIA) showed property prices declined for the seven consecutive month as the market has yet to benefit from the surprise rate cut last month.

Also on the calendar is China's foreign direct investment inflow for November due Monday.

Read MoreChina factory output, retail sales send mixed signal

India's wholesale price index likely eased for the sixth straight month to 1.41 percent in November, according to analysts polled by Reuters. October's reading of 1.77 percent was the lowest level in more than five years due to slower annual rises in food and fuel prices.

Meanwhile, Australia's central bank will be in focus on Tuesday with minutes from its November policy meeting due. The Bank of Thailand will announce its policy decision on Wednesday and is expected to hold rates steady.

Fed rate hike: When will it happen?

Outside of Asia, traders will watch the Federal Open Market Committee (FOMC) meeting on Wednesday for clues to the exact timing of an U.S. interest rate hike.

The world's largest economy has seen a slew of encouraging economic indicators as of late. Apart from increased retail sales in November, the jobs report for the same month showed U.S. employers added the largest number of workers in nearly three years and a pickup in wage growth.

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However, analysts say the Fed will need more positive data before moving closer to a rate hike.

"The Fed has said that they'll be data-driven and they are primarily looking at the labor market. We had a very strong jobs report [this month] which leaves people to think maybe [the rate hike will be] sooner rather than later," Patrick Chovanec, chief strategist at Silvercrest Asset Management, told CNBC.

"But that's just one month so the Fed will be looking at a more consistent trend before they pull the trigger," Chovanec added.