Barclays Capital economist Kyohei Morita said equity markets have already reacted sharply to the outbreak of the swine flu, and that the disease could detract from Japanese GDP if it spreads in the coming weeks.

"Based on several broad assumptions and premises, we found that there would be a downward push of around 0.03% on annual GDP if the effects were to last for one quarter," he said, adding that, "at this stage, there is still insufficient information and numerous uncertainties."

Meanwhile, Tuesday (Monday night EDT) is expected to mark the sixth straight month-over-month drop in Japanese retail sales as the downturn in the country's domestic economy intensifies.

The consensus forecast is calling for retail sales to drop 4.7% annually. Sales fell 5.7% in February. On a monthly basis, sales are expected to fall 0.4% following a 0.2% drop the month prior.

Also during the session, the Bank of Japan will begin its two-day monetary policy meeting. HSBC economist Seiji Shiraishi said the BOJ will hold rates at the already low 0.1%, and that the bank's economic assessment will likely be unchanged.

All times in EDT.

Monday:

19:50 JP Large Retailers' Sales March Exp: -7.8% Prior: -8.2% Revised: -8.1%

19:50 JP Retail Trade (Y/Y) March Exp: -4.7% Prior: -5.8% Revised: -5.7%

19:50 JP Retail Trade (M/M) SA March Exp: -0.4% Prior: -0.3% Revised: -0.2%

20:00 JP Bank of Japan Starts two-day Regular Policy Board Meeting

By Megan Ainscow, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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