Those flows are "extraordinarily large" in some countries, including China, Indonesia and the Philippines, the IMF said, as it released its latest regional economic outlook for Asia and the Pacific.

The region's economies were expected to grow nearly seven percent this year and again in 2012, leading the global economic recovery, the IMF said.

Several countries -- including South Korea, Indonesia and India -- have tightened policy to try to head off huge inflows of foreign capital from investors seeking better returns on their money than in the sluggish West.

"Capital is expected to continue flowing into Asia in 2011 and 2012, attracted by the region's strong growth prospects and fuelled by abundant global liquidity and risk appetite," the report said, adding that the inflows remained a "key concern of policymakers."

But the flows have "generally moderated" since October and remain below levels seen in previous peaks in terms of their share of Gross Domestic Product, such as before the 1997 Asian Financial Crisis, the IMF said.

"The challenge is to ensure this surge remains sustainable," Anoop Singh, director of the IMF's Asia and Pacific Department, told a press briefing in Hong Kong Thursday.

"We need to expect capital flows (into Asia) to continue."

Singh added that regional inflation also remained a concern with signs of "overheating" across the region amid soaring food and energy prices.

Chinese inflation should "peak shortly" before falling closer to four or 4.5 percent later in the year, in line with Beijing's target range, he added.

Earlier this month, China said its consumer price index rose 5.4 percent in March from the year-ago level -- the highest annual rate since July 2008 -- and 5.0 percent in the first quarter of 2011.

The region's overall inflation should peak in 2011 before falling "later this year or early next year," Singh said.

Quake-hit Japan meanwhile has "many options" to pay for the whopping costs tied to rebuilding the country, Singh said, with the government estimating a price tag as high as 25 trillion yen ($306 billion).

Yields on Japanese government bonds have remained "low and stable" which suggests Tokyo could issue more debt to rebuild the country after it was devastated last month by a deadly earthquake and tsunami.

The country could also cut back spending or raise taxes to marshal the necessary funds, which Singh described as "standard practice" for nations rocked by natural disasters.

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