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MSCI's index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS was up 0.27 percent on the day after touching its highest level since May 2008, prompted by optimism on global economic growth.

Japan's Nikkei .N225, however, was down 0.1 percent, erasing early gains.

Oil kicked off the new quarter in positive fashion with U.S. prices climbing after closing at their highest in 2- years on Thursday against the backdrop of continued fighting in Libya and unrest in the Middle East.

Gold fell on more tough inflation talk from U.S. central bankers after notching a 10th quarterly gain.

Investors are treading cautiously ahead of the latest payroll data from the United States later on Friday.

Another month of solid U.S. hiring, expected in the 200,000 area, should reinforce expectations of further global economic expansion but also of an accelerated shift in policy focus among central bankers to stem inflationary pressure.

"At the moment we're getting dragged higher by the momentum we're seeing in the U.S. economy," said IG Markets analyst Ben Potter in Melbourne.

"We could be at the risk of some profit-taking today as people look ahead to tonight's session but that doesn't seem to be the case at the moment."

Signs of improving business activity and rising inflation globally have led the U.S. Fed and the European Central Bank to ratchet up their inflation rhetoric, causing traders to second-guess whether U.S. and European rates will be on hold this year.

In the U.S., Minneapolis Fed President Narayana Kocherlakota told the Wall Street Journal on Thursday that the Fed could raise rates by the end of 2011, far sooner than expected by financial markets. Most analysts do not expect rate hikes until the second half of 2012.

INFLATION TALK BOOSTS DOLLAR

A recent spate of hawkish comments from Fed officials have helped boost the dollar and U.S. bond yields with two-year yields rising to 0.84 percent, the highest in six weeks.

The dollar index .DXY, which tracks its performance against a basket of major currencies, was up 0.3 percent at 76.071. The greenback has rebounded against the yen, a move that has propelled Asian stock markets because it would help the region's exporters.

The dollar climbed to a six-week high against the Japanese currency in early trading. It has recovered from a record low of 76.25 yen on March 17 before G7 central banks intervened to halt the yen's rise. It last traded at 83.66 yen.

Shares of the company, also known as TEPCO, opened up more than 6 percent after the Mainichi newspaper said the government plans to inject public funds into the firm, although it is unlikely to take more than a 50 percent stake.

"If the stake goes over 50 percent, it will be nationalized. But that's not what we are considering," an unnamed government official was quoted by the daily as saying.

TEPCO has come under fire for its handling of the emergency at its Fukushima Daiichi nuclear complex, triggered by a March 11 earthquake and tsunami that left more than 27,500 people dead or missing.

A series of missteps and mistakes, combined with scant signs of leadership, have undermined confidence in the company. TEPCO shares are down almost 80 percent since the disaster.

The Mainichi quoted a government official as saying: "It will be a type of injection that will allow the government to have a certain level of (management) involvement."

TEPCO officials could not immediately be reached for comment.

The company could face compensation claims topping $130 billion if the nuclear crisis drags on, Bank of America-Merrill Lynch estimated this week, further fuelling expectations the government would step in to save Asia's largest utility.

Under law, TEPCO could be exempt from compensation for nuclear accidents caused by natural disasters. But Mainichi quoted the official as saying it would not be possible to apply the legislation given strong public sentiment.

Anger against the company has seen protests outside its Tokyo headquarters, with people demanding an end to nuclear power and calling the company "criminal."

Investor concern about TEPCO mounted after its president, Masataka Shimizu, was admitted to hospital this week and the company said 2 trillion yen ($24 billion) in emergency loans from Japan's major banks would not cover its rising costs.

Liabilities for compensation claims alone could be up to 11 trillion yen ($133 billion) -- nearly four times TEPCO's equity -- if the nuclear crisis drags on for two years, an analyst at Bank of America Merrill Lynch wrote in a report.

TEPCO has around $91 billion in debt including some $64 billion in bonds. That excludes about $24 billion recently secured in loans from domestic lenders.

At the end of December, TEPCO had equity of about $35 billion, its accounts show.

Bank of America-Merrill Lynch said shareholders were very likely to take a big hit and a rapid resolution of the crisis was the only way to keep costs down.

But the government is unlikely to take more than a 50 percent stake in the company, an unnamed government official was quoted by the daily as saying.

"If the stake goes over 50 percent, it will be nationalized. But that's not what we are considering," the official said.

The company, also known as TEPCO, has come under fire for its handling of the emergency at its Fukushima Daichi nuclear complex, triggered by a March 11 earthquake and tsunami that left more than 27,500 people dead or missing.

A series of missteps and mistakes, combined with scant signs of leadership, have undermined confidence in the company. TEPCO shares are down almost 80 percent since the disaster.

Mainichi quoted a government official as saying: "It will be a type of injection that will allow the government to have a certain level of (management) involvement."

TEPCO officials could not immediately be reached for comment.

The company could face compensation claims topping $130 billion if the nuclear crisis dragged on, Bank of America-Merrill Lynch estimated this week, further fuelling expectations the government would step in to save Asia's largest utility.

Under law, TEPCO co u ld be exempt from compensation for nuclear accidents caused by natural disasters. But Mainichi quoted the official as saying it would not be possible to apply the legislation given strong public sentiment.

Anger against the company has seen protests outside its Tokyo headquarters, with people demanding an end to nuclear power and calling the company "criminal".

Investor concern about TEPCO mounted after its president, Masataka Shimizu, was admitted to hospital this week and the company said 2 trillion yen ($24 billion) in emergency loans from Japan's major banks would not cover its rising costs.

Liabilities for compensation claims alone could be up to 11 trillion yen ($133 billion) -- nearly four times TEPCO's equity -- if the nuclear crisis drags on for two years, an analyst at Bank of America Merrill Lynch wrote in a report.

TEPCO has around $91 billion in debt including some $64 billion in bonds. That excludes about $24 billion recently secured in loans from domestic lenders.

At the end of December, TEPCO had equity of about $35 billion, its accounts show.

Bank of America-Merrill Lynch said shareholders were very likely to take a big hit and a rapid resolution of the crisis was the only way to keep costs down.

But Sokol said on CNBC if he had it all to do again, he would have invested in Lubrizol for himself and not passed the recommendation on to Buffett. He said he did not expect Buffett to want to buy the company and was surprised at how quickly the "Oracle of Omaha" moved to make a deal.

Sokol was seen by many investors as the most likely successor to Berkshire Hathaway's iconic CEO, though he made clear in the interview he did not aspire to the job and wanted to build his own "mini-Berkshire" instead.

Buffett released a letter on Wednesday disclosing that Sokol bought a substantial stake in Lubrizol before urging Buffett to acquire the company, which Buffett did for $9 billion this month. Sokol appeared to have made a profit of at least $2.98 million on his investment.

A well-known securities class action lawyer said on Thursday that institutional investors have already been in touch on the disclosures.

"The timing and the facts surrounding the transaction have justifiably raised an interest and concerns from three of my clients," said Darren Robbins, a partner in the firm Robbins Geller Rudman & Dowd.

"We do know David Sokol to be an honorable man," Robbins added, noting his firm will further evaluate the situation before deciding on any lawsuits.

'CAN UNDERSTAND THE APPEARANCE'

But in his half-hour CNBC interview, Sokol insisted he never had any inside information on Lubrizol and that he bought the shares solely as a good investment for his family.

"I'd like to invest my own money, control a significant piece of it, and control my own schedule," Sokol said, later adding, "I didn't know anything others don't know."

Sokol also said he has on past occasions invested in companies that he suggested Buffett buy, noting one example of a bank that Buffett did not ultimately acquire.

He also said other Berkshire executives have in the past held stock in companies they then identified for investment or acquisition, citing the example of Berkshire Vice Chairman Charlie Munger owning a stake in Chinese car maker BYD (1211.HK) before suggesting it for an investment.

Nonetheless, the chairman of Berkshire units MidAmerican Energy and NetJets told CNBC's anchors he understood how the sequence of events looked, even if he did nothing wrong.

"I can understand the appearance of an issue ... That's why we made it public," he said.

Sokol resigned March 28. He said Buffett did not try to talk him out of resigning. Buffett's letter included an excerpt of Sokol's letter, but the full Sokol letter was not made public.

Berkshire's Class B shares, which are more heavily traded than its Class A stock, fell 2.3 percent to $83.53 in mid-afternoon trade, making them the largest decliner among S&P insurance shares .GSPINSC. It was the stock's biggest single-day decline on a percentage basis in about a month.

(Reporting by Ben Berkowitz and Jonathan Stempel; Editing by Dave Zimmerman, Gary Hill)

A key Buffett lieutenant resigned this week, and said he bought shares in a company he later pitched to his boss. While Buffett said his employee, David Sokol, did nothing unlawful, governance experts said the entire episode was a black mark for a company that has long prided itself on its rectitude.

"It's the kind of behavior that, as a matter of corporate governance, sophisticated companies try to avoid," said John Coffee, a law professor at Columbia University.

Experts said that part of the problem may be that Buffett's company, Berkshire Hathaway, prides itself on having few of the internal controls that other major companies have, and instead banks on the honor of its senior employees.

"The key is the people. That's been his playbook ever since he's started. He knows the rules, and he expects the people he works with to know them too," said Michael Holland, chairman of Holland & Co, which oversees $4 billion in assets and owns Berkshire shares.

Changing the way he runs his business would sting for Buffett, who bets everything on his reputation -- something he made crystal clear in a July 2010 memo to his managers that he released this past February.

"We can't be perfect but we can try to be. As I've said in these memos for more than 25 years: 'We can afford to lose money -- even a lot of money. But we can't afford to lose reputation -- even a shred of reputation.'"

He added: "We must continue to measure every act against not only what is legal but also what we would be happy to have written about on the front page of a national newspaper in an article written by an unfriendly but intelligent reporter."

'MANAGE LITTLE'

Buffett likes to brag about the way he runs companies -- by not running them, leaving them instead in the care of what he considers capable executives who do not need his oversight.

"There are managers to whom I have not talked in the last year, while there is one with whom I talk almost daily. Our trust is in people rather than process. A 'hire well, manage little' code suits both them and me," Buffett said in his annual shareholder letter in February.

Ultimately, by his own admission Buffett is not an operational leader, but a sort of inspirational one. He contents himself to let others run the businesses.

Investors say in this case, he may have picked the wrong person to help him lead.

"If I had any knock against Buffett, is how much he espoused his successor, how this was the right guy, how much he rallied the flag around him as his successor ... and now this guy is gone," said Matt McCormick, portfolio manager at Cincinnati-based Bahl Gaynor Investment Counsel.

(Additional reporting by Dan Wilchins, Jonathan Stempel and Maria Aspan in New York and Sarah Lynch in Washington, editing by Matthew Lewis)

But Sokol said on CNBC if he had it all to do again, he would have invested in Lubrizol for himself and not passed the recommendation on to Buffett. He said he did not expect Buffett to want to buy the company and was surprised at how quickly the "Oracle of Omaha" moved to make a deal.

Sokol was seen by many investors as the most likely successor to Berkshire Hathaway's iconic CEO, though he made clear in the interview he did not aspire to the job and wanted to build his own "mini-Berkshire" instead.

Buffett released a letter on Wednesday disclosing that Sokol bought a substantial stake in Lubrizol before urging Buffett to acquire the company, which Buffett did for $9 billion this month. Sokol appeared to have made a profit of at least $2.98 million on his investment.

In a half-hour interview, Sokol insisted he never had any inside information on Lubrizol and that he bought the shares solely as a good investment for his family.

"I'd like to invest my own money, control a significant piece of it, and control my own schedule," Sokol said, later adding "I didn't know anything others don't know."

Sokol also said he has on past occasions invested in companies that he suggested Buffett buy, noting one example of a bank that Buffett did not ultimately acquire.

He also said other Berkshire executives have in the past held stock in companies they then identified for investment or acquisition, citing the example of Berkshire Vice Chairman Charlie Munger owning a stake in Chinese car maker BYD before suggesting it for an investment.

Nonetheless, the chairman of Berkshire units MidAmerican Energy and NetJets told CNBC's anchors he understood how the sequence of events looked, even if he did nothing wrong.

"I can understand the appearance of an issue ... That's why we made it public," he said.

Sokol resigned March 28. He said Buffett did not try to talk him out of resigning. Buffett's letter included an excerpt of Sokol's letter, but the full Sokol letter was not made public.

Berkshire's Class B shares, which are more heavily traded than its Class A stock, opened 1.6 percent lower at $84.06.

(Reporting by Ben Berkowitz and Jonathan Stempel; Editing by Derek Caney, Lisa Von Ahn, Dave Zimmerman)

Initial claims for state unemployment benefits slipped 6,000 to a seasonally adjusted 388,000 the Labor Department said. The government revised weekly claims data back to 2006 to take into account new seasonal factors.

The claims data falls outside the survey period for the government's closely watched employment report for March, which is scheduled for release on Friday.

Nonfarm payrolls are expected to have increased a solid 190,000 after rising 192,000 in February, according to a Reuters survey, with the unemployment rate seen holding steady at a near two-year low of 8.9 percent.

The labor market is strengthening even though economic growth slowed somewhat early in the year, held back by bad weather and rising energy prices, after a fairly brisk pace in the fourth quarter.

Payrolls processing firm ADP Employer Services said on Wednesday private employers added 201,000 jobs in March.

U.S. stock index futures were little changed after the data, while government bond prices added to gains. The U.S. dollar fell against the euro.

Economists polled by Reuters had forecast claims edging down to 380,000. The prior week's figure was revised up to 394,000 from the previously reported 382,000.

The four-week moving average of unemployment claims -- a better measure of underlying trends - rose 3,250 to 394,250.

A Labor Department official said there was nothing unusual in the claims data. Claims have now held beneath the 400,000 level that is generally associated with steady job growth for three weeks in a row, with the four-week average below that mark for the fifth straight week.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 51,000 to 3.71 million in the week ended March 19, the lowest level since October 2008.

Economists had expected so-called continuing claims to fall to 3.70 million from a previously reported 3.72 million.

The number of people on emergency unemployment benefits dropped 38,838 to 3.59 million in the week ended March 12, the latest week for which data is available. A total of 8.77 million people were claiming unemployment benefits during that period under all programs.

Concerns about the impact on high oil and food prices on global growth and central bank moves to curb inflation have overtaken worries about Japan's nuclear crisis and unrest in the Middle East, but investors remain cautious.

"Shares are modestly expanding gains on continued foreign buying around sectors that are seen bullish," said Chung Seung-jae, a market analyst at Mirae Asset Securities in Seoul.

MSCI's index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.3 percent on the day, putting it on track for a 4.3 percent gain in March despite a sharp downward spike following the massive earthquake and tsunami which hit Japan on March 11, severely damaging a nuclear power plant and knocking many factories offline.

For the year to date, the Asia ex-Japan index has gained nearly 1 percent.

By comparison, the MSCI world index .MIWD00000PUS was little changed on the quarter, but has gained around 4 percent so far in 2011. Relative weakness in Asia was offset by strong gains early in the year in major U.S. and European indexes as investors rotated from emerging markets to large, developed ones.

A key investment decision for Asian stock investors in the coming months will likely be whether to pile bets on China and the faster-growing economies in Asia over safer but lower-returning investments in developed economies, analysts said.

Gross domestic product of emerging markets will on average expand 6.0 percent in 2011 and 2012, more than double those of developed markets, according to JPMorgan economists.

In Asia, Japan is expected to lag its neighbors as the world's No. 3 economy faces huge rebuilding cost from the twin disasters this month and the still unknown toll from the damaged nuclear plant, which is still leaking radiation.

The yen has declined to the lowest since May 2010 against the euro in the wake of recent hawkish comments by euro zone officials signaling interest rate hikes, and has slid against the dollar as well after U.S. central bank officials indicated they may soon start withdrawing enormous levels of stimulus from that economy.

Japan's Nikkei index .N225 trimmed gains to trade flat after opening higher and following Wednesday's 2.6 percent rally. So far in March, it has shed 9 percent, heading for its worst month since May 2010. Year to date, the benchmark has fallen around 5 percent.

WEAKER YEN BOOSTS EXPORTERS' SHARES

The weaker yen is expected to boost the demand for Japanese goods in overseas markets, though investors remain concerned about the impact of power shortages on Japanese manufacturers following the disasters.

It is also seen as a cheap way to fund higher-yielding assets such as the Australian dollar which reached a 10-month high against the yen and a 29-year high against the U.S. dollar in early trading.

But the yen on Thursday pulled back from its earlier lows, trading flat against major currencies.