Tokyo pharma stock market to May 7, 2001

Tokyo saw a surprisingly strong market on heavy volume in the week toMay 7, although the review period included only three trading days because May 3 and 4 were national holidays. The Nikkei 225 and the Topix index gained 4.3% and 5.5% respectively, with both indices renewing this year's high.

Supporting the brisk activity was the market's expectations for structural reforms of the financial and administrative system under new Prime Minister Junichiro Koizumi. In his inaugural policy speech, Mr Koizumi expressed a determination to limit the issuance of government bonds and to eliminate banks' bad debt in two-three years, providing a psychologically positive impact to the market.

While domestic investors took to the sidelines due to a string of holidays, those from overseas were actively on the buy side. Some market observers see that the new cabinet's extremely high acceptance rate shown in the latest opinion poll and the expected reforms may have led foreign investors to regain confidence in the Japanese government and equity market. On the other hand, some investors remain cautious, anticipating that the market could possibly weaken in the event that the new cabinet fails to carry out promptly concrete measures.