Japan stock market week to June 26, 2006

Tokyo saw an extended recovery in the week ended June 26. The Nikkei 225 advanced 2.0%, managing to close at slightly above the 15,000 mark, while the Topix index was up 1.4%. However, market energy was basically weak, with trading volume thin due to continued concerns about the direction of interest rates in Japan and the USA. The Japanese index of business confidence of leading corporations in the April-June period deteriorated to 1.8, the lowest in four quarters, compared with 6.1 in the previous three-month period. (The index is derived by subtracting the percentage of corporations realizing worsening business conditions from that of companies achieving improvements.) Some investors thought that the Tokyo market hit the bottom in the previous week, but the extent of the rally so far has not been substantial.

The pharmaceutical index rose 1.8%, slightly underperforming the market. The pharmaceutical sector overcame the previous week's media reports that the government had began to deliberate the possibility of cutting drug reimbursement prices next spring again with the extent of the reduction being 10% at most. The government reportedly plans to implement the drug price cut annually rather than once every two years. The implementation of the price cut next spring may be difficult technically, while it is broadly anticipated that it could be effected annually from spring 2008.

Dainippon Sumitomo leapt 5.0%, responding the positive development of the law suit filed by Pfizer against the Japanese firm. The UK High Court of Justice reached the judgment that English courts have no jurisdiction regarding Pfizer's law suit filed with the High Court. Pfizer has been demanding the halt of the manufacture and sale of the anti-hypertensive drug Amlodin (amlodipine besillate) and the return of all medical data and information on the drug to Pfizer, which is the licensor.