Led by exporters such as Honda Motor Co, Japanese stocks fell yesterday after a US report showed the biggest jump in producer prices since 1990.

　　The rapid rise signaled that the Federal Reserve may have more cause to raise interest rates.

　　"The report increases concern about higher rates and their knock-on effects on the US economy and exporters' sales," said Naohiko Sasaki, who helps oversee US$30.6 billion as co-head of investments at Kokusai Asset Management Co in Tokyo. He declined to comment on his investments.

　　The nikkei 225 Stock Average dropped 0.3 percent to 11,131.29 at the close in Tokyo. The Topix index lost 0.5 percent to 1,114.61.

　　Both benchmarks fell for a second day, after having their biggest gains in six weeks on Monday. Automakers and computer-related stocks, Japan's two-biggest export industries, accounted for about half of the declines.

　　Elsewhere in the region, Taiwan's Taiex index climbed to a five-week high after Morgan Stanley Capital International Inc said that it will raise the proportion of the island's stocks in its indexes.

　　Yuanta core Pacific Securities Co, the island's largest brokerage, had its biggest jump in three months after MSCI said it will join its global benchmarks next month.

　　Qantas airways Ltd, KLCC Property Holdings Bhd, the owner of Malaysia's Petronas Twin Towers; Hutchison Telecommunications International Ltd, a phone company controlled by Hong Kong billionaire Li Ka-shing; and Tata Consultancy Services Ltd, India's biggest computer software maker, also will be added.

　　Malaysia's stock index was the biggest regional gainer, adding 2.1 percent as some investors bet the nation will drop its currency's peg to the US dollar, allowing the ringgit to strengthen.

　　Morgan stanley Capital International's Asia-Pacific Index, which tracks more than 900 companies, rose 0.4 percent to 96.20. All other stock benchmarks gained, except for those in New Zealand and China's mainland. Indonesia was closed for a public holiday.

　　Inpex corp, Japan's largest oil explorer, surged 18 percent in the first day of trading to 549,000 yen (US$5,147). Japan National Oil Corp sold a 17.9 percent stake in Inpex earlier this month, raising 160 billion yen in Japan's third-largest initial public offering this year.

　　Honda, Japan's third-largest automaker, fell 2.4 percent to 5,200 yen. The company gets 90 percent of its operating profit from North America. Canon Inc, the world's largest seller of digital cameras, dropped 0.9 percent to 5,380 yen. The company gets 70 percent of its revenue from overseas.

　　Us wholesale prices rose 1.7 percent in October as energy costs climbed, the Labor Department said on Tuesday. An estimate of 74 economists in a Bloomberg News survey forecast a 0.6 percent increase.

　　The rise in prices may make it more likely that the Fed will lift its benchmark lending rate again next month. Fed funds futures, indications of what traders expect the average overnight rate to be in a particular month, show most anticipate that the central bank to raise the rate at its monetary-policy meeting on December 14.

　　Taiwan's taiex index gained 2 percent to 6,028.68 after the MSCI announcement. Yuanta Core Pacific Securities rose 6.3 percent to 25.30 New Taiwan dollars (78 US cents), its biggest jump since August 19.

　　Overseas institutional investors in the first 16 days of this month bought NT$9.2 billion more of Taiwanese stocks than they sold, according to data compiled by Bloomberg.

　　"Overseas investors have been adding Taiwan stocks leading up to the MSCI announcement, and they are expected to continue buying," said Belinda Yu, who oversees the equivalent of US$2.6 billion at Jih Sun Securities Investment Trust Co's fund management department.

　　Taiwan semiconductor Manufacturing Co, the world's largest supplier of made-to-order computer chips, rose 2.7 percent to NT$49.40. Hon Hai Precision Industry Co, the island's largest electronics company by sales, rose 1.5 percent, to NT$132.50.

　　(Bloomberg News)