Asian stocks retreated this week as eurozone concerns returned with the Cyprus bailout proposal and Bank of Japan's new governor failing to provide a clear roadmap for stimulus measures.

The Nikkei 225 average index slipped 1.8 percent in the week, while South Korea's KOSPI retreated 1.9 percent. Australia's S&P/ASX 200 fell 3 percent.

Hong Kong's Hang Seng was down 1.9 percent. The Shanghai Composite Index gained 2.2 percent as private-sector survey showed improvement in the country's manufacturing sector.

Eurozone concerns took centre-stage after Cyprus's international lenders suggested that the island nation should impose a bank deposit levy in exchange for the €10bn bailout fund. This sparked fears across the region as investors worried that the practice may become a model that could come into play when other larger economies seek bailout in the future.

Adding fuel to fire, the European Central Bank (ECB) has said that it will pull the plug on the emergency liquidity provision to Cyprus unless a decision is reached by early next week. Nicosia's efforts to submit alternate plans to its lenders failed to have the desired effect and its steps to get support from Russia failed to materialise.

But some reports suggest that Cyprus is expected to shift its stand and avert the looming fiscal catastrophe as it indicated that the bank levy plan is still on the cards. Reuters reports that lawmakers are considering taxes on deposits above €100,000, exempting smaller investors. Eurozone finance ministers are reportedly planning a meeting on the matter in Brussels over the weekend.

Lawmakers have decided to restructure the island's banks and agreed on a "national solidarity fund", which would bring together state assets for an emergency bond fund, and capital controls to avoid a bank run.

Bank of Japan Disappoints

In Japan, sentiments were high early in the week in anticipation of the first news conference from Bank of Japan's new governor Haruhiko Kuroda. Media reports before the briefing had indicated that Kuroda might announce aggressive monetary easing measures that could accelerate the efforts to meet inflation targets.

But Kuroda merely reiterated his commitment to boosting the economy, stopping short of providing further details on the central bank's plans. This disappointed the markets, and the yen rebounded from its record weak levels.

All eyes are now on BoJ's next policy meet, scheduled for 3 and 4 April.

China Manufacturing

China's economic recovery hopes received yet another boost after HSBC's preliminary estimate of manufacturing purchasing managers index (PMI) showed that factory activities in the world's second largest economy picked up in March. This comes after weak figures recorded in February, mainly due to the seasonal distortions from the Lunar New Year holidays.

The Week Ahead

European developments could dominate sentiments next week, with the spotlight expected to turn from Cyprus to Italy, where the recent elections have triggered a political deadlock. Meetings between the Italian president and leaders did not make much progress this week.

A number of US economic indicators are set for release in the coming days. But analysts warn that after the recent positive data, the upcoming indicators may point to a softening of activities. February's durable goods orders and new home sales data may show a drop while consumer confidence for March could show weakness.

Investors will also be awaiting Japan's usual month-end data, which includes industrial output, manufacturing PMI and unemployment data. Analysts have warned that the data could once again remain weak.