Japanese stocks dropped, sending benchmarks to their biggest losses in almost a month. Toyota Motor Corp declined on concern a stronger yen and less-than-expected job creation in the United States will limit exporters' sales.

　　The Nikkei 225 Stock Average slid 1.05 percent and closed at 10,849.68 in Tokyo. The Topix index shed 0.7 percent to 1058.40. Both benchmarks had their biggest declines since December 17. The Morgan Stanley Capital International Asia-Pacific Index, which tracks more than 800 companies in the region, lost 0.4 percent to 89.94.

　　Investors in Japan reacted for the first time to two days of gains in the yen and a report on Friday that showed the US economy added fewer jobs than some economists had expected.

　　"The biggest worry in the stock market right now is the weakness in the US dollar, which could hurt the export-led recovery in Japan," said Koichi Ogawa, who oversees the equivalent of US$8.6 billion in Japanese equities as chief portfolio manager at Daiwa SB Investments Ltd in Tokyo.

　　Hong Kong's Hang Seng Index climbed to its highest level in two-and-a-half years in its busiest trading day since August 1998. Shares of utility companies such as Hong Kong & China Gas Co, known as Towngas, advanced as some investors switched to companies that offer the highest dividend payouts.

　　Computer-related stocks in Singapore such as Venture Corp gained, boosting the Straits Times Index to more than a three-year high. The US Nasdaq Composite Index climbed yesterday to its highest since July 2001, boosting optimism that corporate earnings industrywide will gather pace.

　　Benchmarks in India, Indonesia and the Philippines rose, while all others declined.

　　Toyota, the world's third-largest carmaker, shed 1.6 percent to 3,650 yen (US$34.30). Canon Inc, which gets 70 percent of its sales from abroad, lost 2.7 percent to 5,070 yen. Automakers and computer-related shares accounted for almost half of the Topix's slide.

　　The yen gained for a second day and recently traded at 106.53 against the dollar, after rising as high as 108.28 on Friday. The Bank of Japan spent up to US$10 billion selling its currency on Friday, according to estimates from analysts including Hans Guenter Redeker, head of currency strategy at BNP Paribas SA in London.

　　"A stronger yen will eventually take a toll on earnings among exporters," said Yoshihisa Okamoto, who helps manage US$2.1 billion at Fuji Investment Management Co in Tokyo.

　　The yen gained 11 percent against the dollar in 2003.

　　The stronger currency threatens Japan's export-led recovery because it reduces the amount exporters get from their dollar-denominated sales and makes products shipped to the US more expensive.

　　Separately, payrolls in the US, Japan's biggest export market, rose by 1,000 jobs last month, the US Labor Department said on Friday, rather than the 150,000 economists had predicted.

　　The report sparked concern about consumer spending in the world's largest economy.

　　The Hang Seng added 0.33 percent to 13,396.65, its highest since June 13, 2001. Shares worth HK$38.8 billion (US$5 billion) changed hands.

　　Towngas, Hong Kong's dominant gas supplier, climbed 3 percent to HK$12.05. CITIC Pacific Ltd, which invests in airlines and power companies, added 1.9 percent to HK$21.65. The stock has a dividend yield of 6.9 percent, the highest among the 33 constituents of the Hang Seng.

　　Falling interest rates have prompted investors to shift to equities from bonds. HSBC Holdings Plc and Bank of East Asia Ltd said over the weekend that they will cut their Hong Kong dollar savings interest rate to 0.001 percent from 0.01 percent.

　　"Given the low interest rate environment, people should go for high yield," said Vincent Koo, who helps manages US$600 million at Kingsway Fund Management Ltd. "If there is another major run of share placements, the liquidity may dry up."