Tokyo ended 0.48 percent, or 46.71 points, lower at 9,708.39 after gaining more than three percent in the previous two sessions.

But Seoul ended 0.68 percent, or 14.31 points, up at a record high 2,121.01, while Sydney added 0.50 percent, or 23.9 points to 4,861.8.

Hong Kong gained 0.36 percent in the afternoon and Shanghai rose 0.28 percent.

As workers struggle to avert a catastrophe at the Fukushima Daiichi nuclear plant that was battered by the March 11 quake and tsunami, dealers looked to its impact on corporate Japan following production halts and rolling blackouts.

The closely-watched Tankan survey of business confidence showed an improvement in March but the Bank of Japan said most of the firms that took part submitted their responses before the earthquake.

The central bank said it will release a separate survey on Monday to reflect results after the disaster, with Tsuyoshi Segawa, equity strategist at Mizuho Securities, telling Dow Jones Newswires they "are expected to be severe".

Tokyo Electric Power (TEPCO), which operates the stricken atomic plant, closed down 3.6 percent at 449 yen, the company now having lost around 80 percent of its pre-crisis market value.

There was optimism at US figures showing the number of first-time claims for unemployment insurance fell to a seasonally adjusted 388,000 last week, from an upwardly revised 394,000 the week before.

The data came a day after a study by payrolls firm ADP showed US companies added 201,000 jobs in March, the third straight month in which more than 200,000 jobs were created.

It also provided a lift for investors ahead of key non farm payrolls figures later Friday, which will paint a clearer picture of the state of the world's biggest economy.

A rise in manufacturing in China last month added to upbeat sentiment, easing fears of a slowdown in the world's second biggest economy.

The official purchasing managers index rose to 53.4 in March from 52.2 in February, after three consecutive months of slowdowns, the China Federation of Logistics and Purchasing (CFLP) said in a statement.

A separate survey by HSBC saw the PMI rise to 51.8 in March from 51.7 in February. A reading above 50 indicates the sector is expanding while a reading below 50 indicates contraction.

Expectations of an interest rate hike by the European Central Bank put upward pressure on the euro after data showed inflation in the region continues to rise.

The euro bought $1.4170 in early Asian trade, up from $1.4155 in New York late Thursday, while it also gained to 118.45 yen from 117.11.

The dollar traded at 83.59 yen compared with 83.20.

"Stronger than expected inflation data affirmed the case for ECB to raise rates in April and increases the possibility for more rate hikes down the road this year," Action Forex said in a report.

The ECB is due to meet on April 7, and president Jean Claude Trichet hinted at the beginning of March that the central bank would raise rates at the meeting.

Data Thursday showed eurozone March inflation rising to 2.6 percent from 2.4 percent in February, its highest since October 2008 and well above the ECB's two percent target for a fourth month.

Meanwhile the Wall Street Journal said that the central banks of Malaysia and South Korea had stepped into the currency markets to halt the rise of their currencies against the dollar.

The report comes as a number of Asian nations struggle to halt a huge influx of capital from the West, which they fear could destabilise their economies.

On oil markets the conflict in Libya and hopes for the global economic recovery sent crude to a two and a half year high.

New York's main contract, West Texas Intermediate (WTI) light sweet crude for May delivery, rose 29 cents to $107.01 a barrel in afternoon Asian trade, surpassing the $107 level last exceeded in September 2008.

Brent North Sea crude for delivery in May turned lower, falling 17 cents to $117.19, but analysts said the upward trend remained.

Dealers bought up the black gold on news that forces fighting for strongman Moamer Kadhafi had wrested two ports as well as key oil hub Ras Lanuf from rebel hands while successfully defending anotheAFP

The gains indicated prolonged civil strife in the war torn oil exporting nation.

Gold opened at $1,430.80-$1,431.80 an ounce in Hong Kong, up from Thursday's close of $1,427.50-$1,428.50.

In other markets:

Taipei ended 0.25 percent, or 21.83 points, higher at 8,705.13.

Taiwan Semiconductor Manufacturing Co rose 0.14 percent to Tw$70.7 while Acer fell 4.83 percent to Tw$57.1.

Manila rose 1.83 percent, or 74.40 points, to 4,129.54.

Philippine Long Distance Telephone added 1.4 percent to 2,356 pesos, Ayala Land was up 3.9 percent at 16.10 and Aboitiz Equity Ventures advanced 2.5 percent to 42.15.

Wellington closed 0.36 percent, or 12.29 points, higher at 3,452.14.

Fisher & Paykel Appliances gained 2.5 percent to NZ$0.61 and Steel & Tube added 1.9 percent to NZ$2.65.