Japan stock market 3 weeks to Jan 2, 2006

Tokyo saw further gains in the three-week extended, holiday-spattered reporting period to January 2 (the last day was a national holiday in Japan). The Nikkei 225 advanced 2.4% to close the year 2005 at above the 16,000 mark. After hitting this level on December 26 for the first time in five years, a see-saw movement prevailed with crosscurrents of buying and profit-taking, but the basic tone was strong. The Topix index rose 1.6%. Leading the rally was continued expectation for a fully-fledged recovery of the Japanese economy. The Bank of Japan's tankan quarterly business survey in December showed that the business confidence index of large corporations was 21, up two points from the survey in September, indicating the third straight quarterly improvement. As part of its review of the tankan, the BoJ is considering discontinuation of its extremely easy monetary policy sometime in 2006.

The pharmaceutical index edged down 0.9%, underperforming the market. Takeda dropped 3.0%, without reacting to its announcement with House Foods on an agreement to establish a new joint venture to which the businesses of Takeda Food Products will be transferred. House Foods and Takeda will own 66% and 34% of the joint venture, respectively, with operations due to start in April. 18 months later the 34% shares owned by Takeda will be transferred to House Foods. The move is a part of Takeda's strategy of concentrating on its pharmaceutical business. Takeda's share performance was not helped by the news that TAP Pharmaceutical Products, its joint venture with the USA's Abbott Laboratories, had out-licensed to Novartis trade mark and certain other intellectual property rights to the antiulcer agent Prevacid (lansoprazole) for development and future commercialization in the over-the-counter market in the USA and its territories. TAP is to market prescription Prevacid until at least 2009, when the compound's patent expires, while Novartis is to take a multi-year OTC development initiative.

Astellas declined 1.7%, without responding to a report that its US subsidiary has submitted a New Drug Application for the immunosuppressant FK506 (tacrolimus) modified-release formulation for the prevention of organ rejection in transplants. The company expects that patients' compliance will be improved with the new, once-daily formulation compared with conventional twice a day administration.