March 17 (Bloomberg) -- Japanese stocks advanced, reversing losses for the week. Exporters such as Matsushita Electric Industrial Co. gained after a U.S. report showed slower-than- expected inflation, easing investors' concern that interest rates will keep rising.

``The U.S. economy looks stable,'' said Atsushi Osa, who helps oversee $4.1 billion at Sumitomo Mitsui Asset Management Co. in Tokyo. ``Easing concern over interest rates prompted investors to buy back the stocks including technology shares that they had sold.''

Takeda Pharmaceutical Co. led gains by drugmakers after saying it won the exclusive right to sell Tavocept, a cancer drug.

The Nikkei 225 Stock Average gained 48.79, or 0.3 percent, to 16,145.00 at the 11 a.m. lunch break in Tokyo. The broader Topix index rose 4.31, or 0.3 percent, to 1649.37. Nikkei 225 futures expiring in June slipped 0.1 percent to 16,080 in Osaka and were little changed at 16,070 in Singapore.

For the week, the Nikkei has gained 0.2 percent and the Topix has gained 0.1 percent so far. The Nikkei yesterday had the biggest slide since March 3, losing 1.4 percent and the Topix declined the most since March 1, falling 1.3 percent.

Sumitomo Trust & Banking Co. gained after saying it may buy preferred shares in Yachiyo Bank Ltd.

Matsushita, the world's biggest consumer electronics maker, advanced 15 yen, or 0.6 percent, to 2,555. Nissan Motor Co., Japan's second-biggest carmaker, rose 6 yen, or 0.4 percent, to 1,358. Nissan made the biggest portion of sales in North America last year.

Takeda's Rights

U.S. consumer prices rose 0.1 percent in February, slower than the 0.7 percent increase the previous month, the Labor Department said. A separate report showed first-time claims for U.S. unemployment benefits unexpectedly rose last week. Initial jobless claims increased by 5,000 to 309,000 in the week ended March 11, the department said.

Central bank policy makers are watching inflation, the job market and factory use to decide how many more times to raise borrowing costs. The Fed has raised its benchmark overnight lending rate 14 times since June 2004 to 4.5 percent from 1 percent, to prevent the economic expansion from overheating.

Takeda, Japan's largest drugmaker, added 110 yen, or 1.7 percent, to 6,780 after it won rights to sell Tavocept developed by Texas-based BioNumerik Pharmaceuticals Inc., in Japan.

Takeda will pay three other drugmakers, including Aska Pharmaceutical Co., an upfront cash payment, sales milestone payments and a royalty from product sales in Japan, the two companies said in a joint statement yesterday.

Higher Dividend Payouts

The Topix Securities Index rose 2.7 percent, the biggest percentage advance of the 33 industry groups in the broader gauge. Increased dividend payments by brokers for the fiscal year 2005 are attracting investors, according to Osa.

Nomura Holdings Inc., Japan's largest brokerage, gained 65 yen, or 2.7 percent, to 2,485. Daiwa Securities Group Inc., the second biggest, advanced 30 yen, or 2.1 percent, to 1,475.

Nomura said on March 3 that it will more than double 2005 dividend payouts as third-quarter profit jumped fourfold.

Marusan Securities Co. yesterday said it plans to pay a full- year dividend of 110 yen, three times more than a year ago. Marusan soared for a second day, surging 245 yen, or 15 percent, to 1,868.

``Brokerages that announced dividend increases are attracting money as the end of fiscal year is approaching,'' said Sumitomo Mitsui's Osa.

Yachiyo Bank Stake

Sumitomo Trust, Japan's fifth-largest bank by assets, rose 15 yen, or 1.3 percent, to 1,208. It may spend 40 billion yen($342 million) buying preferred stock in Yachiyo Bank. The lender may also buy 5 percent of the lender's common shares becoming its biggest shareholder and forming an alliance, Naoki Sugihara, a spokesman at Sumitomo Trust, said in an interview.

The bank will buy the common stock from Yachiyo shareholders, including its workers, for 3 billion yen, the Nihon Keizai newspaper reported earlier, without saying where it got the information.

Mitsui Engineering & Shipbuilding Co., a shipbuilder and heavy machinery maker, jumped 25 yen, or 7.3 percent, to 369 after the Nihon Keizai newspaper said the company won an order worth about 100 billion yen for two plants in Saudi Arabia. The stock had the biggest fluctuation in the Morgan Stanley Capital International World Index.

Sanyo Electric Co., an electrical appliance maker, advanced 6 yen, or 2 percent, to 305 after a report the company plans to make televisions with Taiwan's Quanta Display Inc. Sanyo probably will spin off its television unit and set up a joint venture with the producer of liquid-crystal display panels, reducing costs, Nikkei English News reported.

To contact the reporter for this story: Makiko Suzuki in Tokyo at msuzuki13@bloomberg.net.

Last Updated: March 16, 2006 21:40 EST