Japan's 10-year bond yields rose more than 10 basis points to a 4-1/2-month high of -0.03 percent after a weak debt auction, according to Reuters. The news agency also reported that investors were fretting about a shift in policy towards fiscal stimulus from monetary easing which is seen as having less direct impact on asset prices.
"(Japanese) PM Abe is moving, with a strong parliamentary majority, to boost economic growth and inflation. In spite of the resounding lack of success thus far, the one major advantage that Japan has over the euro zone is in terms of its political landscape," analysts at Rabobank said in a note.
"With just one government and one centralized fiscal plan, 'Abenomics' may yet prove a success (we reiterate....'may')."
Investors also digested U.S. economic data, including personal income for June, which rose 0.2 percent. Economists polled by Reuters expected an increase of 0.3 percent. U.S. personal spending rose 0.4 percent.
Investors will also receive new July vehicle sales data.