What’s Important in Asia This Week

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Japanese economic data are likely to be watched closely this week for solid signs of whether efforts to revive the world's third largest economy are starting to work.

The rest of the region should have a relatively quiet week, although jitters about an unwinding of U.S. monetary stimulus and concerns about slowing economic growth in China could continue to drive market sentiment.

Inflation, household spending, industrial production and jobs numbers for May are all scheduled for release in Japan towards the end of the week.

"Japanese data due Friday are expected to show further gains in household spending, industrial production, manufacturing conditions and the labor market along with a further slowing in deflation," Shane Oliver, chief economist at AMP Capital, said in a research note.

Economists polled by Reuters forecast Japan's core consumer price index (CPI) was flat in May from a year earlier after a 0.4 percent decline in April.

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Household spending is expected to rise 1.5 percent in May from a month earlier, compared with a 4.6 percent fall in April.

Last week's data showed Japanese exports rose a stronger-than-expected 10.1 percent in May from a year earlier. Further signs of strength in the economy could boost sentiment in Japanese markets, which have sold off sharply in recent weeks amid some caution about the success of Japan's economic policies.

India's Deficit Woes

Elsewhere in Asia, Taiwan's central bank meets on Thursday and India is expected to release its latest current account numbers on Friday.

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India's current account deficit hit a record $32.6 billion in the last three months of 2012, or 6.7 percent of gross domestic product, compared with about $22.3 billion in the previous quarter.

The figures are in focus as the rupee weakens against the dollar, pushing up the price of imports and threatening to exacerbate the deficit. The rupee hit a record low just shy of 60 per dollar last week.

Post-Fed Focus

After the Federal Reserve last week suggested that it could start to unwind its monetary stimulus program for the economy later this year, U.S. economic data could also provide a steer for jittery markets.

U.S. data released this week include durable goods, new home sales and home-price data Tuesday, and jobless claims and personal income numbers Thursday.

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"The Fed said last week that they would look at economic data and if we see data showing general improvement, we could see more dollar strength," said Chris Tedder, research analyst at Forex.com, referring to a rally in the dollar versus both major and emerging market currencies amid expectations for a tapering of Fed stimulus.

Investors were also expected to pay attention to developments in China, where there has been a severe strain in liquidity conditions over the past two weeks that has raised concerns about the financial risks facing the world's second biggest economy.

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"China's cash squeeze has been completely overlooked over the last few weeks as the build-up to [Fed chief] Ben Bernanke's speech [last week] reached fever-pitch and drowned everything else out," said Evan Lucas, Market Strategist at trading firm IG.

— By CNBC.Com's Dhara Ranasinghe, Follow her on Twitter:@DharaCNBC