This paper presents an algorithm using a stepwise programming method to determine the suitable locations for capacitors installations and their ratings in distribution networks. The Voltage and loss reduction capability of nodes are regarded as input indices. The fuzzy inference method is used to obtain capacitor placement suitability of every node. The node having the highest suitability is selected as the compensation node. The energy losses of three time periods and the peak charge are modeled as optimization objective. Fuzzy multi-objective programming is used to determine the proper sizes of the capacitors. Considering the each capacitor rating interaction, the circulation calculation method is used to recalculate the capacitor rating for compensated nodes. The results of test system demonstrate the effectiveness and practicability of the method.