Nikkei climbs, boosted by construction and drugs

(Updates with stocks, details) By Elaine Lies

TOKYO, May 23 (Reuters) - Japan's Nikkei stock average edged up 0.7 percent on Friday, buoyed by construction firms and drugs on news that Roche Holding AG (ROG.VX) will increase its stake in partner Chugai Pharmaceutical Co Ltd (4519.T), but weighed down by trading companies hit by lower oil prices.

Chiyoda Corp (6366.T) extended gains made after a brokerage upgrade, surging 10.4 percent to rise roughly 16 percent over the past two days and giving other construction firms a boost.

Energy shares suffered along with trading firms as oil retreated from Thursday's record high above $135 a barrel, with shippers, which powered sharply higher last week, also dented as the cumulative effect of oil's rise bit more deeply. "Without any big U.S. indicators, and with a weekend coming up -- a weekend that's a long holiday in the U.S. -- the market is simply dithering without clear direction," said Fujio Ando, senior managing director at Chibagin Asset Management. "We're seeing a shift to defensive shares, which is helping drug firms, on nervousness about the exchange rate and where the U.S. economy is going, but gains will be limited as investors lock in profits ahead of the weekend."

Oil prices pulled back sharply on Thursday from the record set earlier that day, and while U.S. crude CLc1 edged up a bit on Friday, it still hovered around $131 a barrel.

Exporters gained a bit as the dollar climbed against the yen. High oil prices put the Japanese currency under pressure on concerns it might dent growth in Japan's economy, though market players said the inflation shadow hanging over the U.S. economy was having little impact.

"Certainly the issue is very different for Japan, where inflation isn't a concern. Of course, we'll have to pay attention if the situation becomes serious overseas," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

The Nikkei .N225 gained 102.50 points to 14,080.96, while the broader Topix was up 0.6 percent at 1,387.89.

CONSTRUCTION, DRUGS Chiyoda surged for a second straight day after CLSA lifted on Thursday its rating on the plant engineering firm two notches to "outperform" from "sell", becoming one of the largest contributors to the Nikkei.

It finished the morning at 1,134 yen.

Other strong construction performers were Kajima Corp (1812.T), which gained 3.8 percent to 412 yen, and Tekken Corp (1815.T), which rose 5.2 percent to 121 yen.

Chugai climbed 3.5 percent to 1,652 yen after partner Roche said it would increase its stake in the Japanese drug maker to 59.9 percent from 50.1 percent via a tender offer worth 95 billion yen ($913 million). Roche will bid 1,730 yen per share.

Roche and Chugai first formed their alliance in 2001 and as part of their original contract, Roche had the option to increase its stake to 59.9 percent. Takeda Pharmaceutical Co Ltd (4502.T) rose 2.4 percent to 5,890 yen and Astellas Pharma Inc (4503.T) gained 3.1 percent to 4,390 yen.

Trading houses slid on the lower oil prices, with Mitsubishi Corp (8058.T) down 2.6 percent at 3,810 yen and Itochu Corp (8001.T) down 2.6 percent at 1,259 yen.

"Trading firms still have relatively low valuations, so we may see some buying later in the day, as we did on Thursday," said Chibagin Asset's Ando.

Oil and gas field developer Inpex Holdings Inc (1605.T) slid 1.5 percent to 1.36 million yen and oil refiners also fell.

Shippers fell back as well, with high oil prices starting to bite, though Ando said he thought these, too, were probably a good buy.

Kawasaki Kisen Kaisha Ltd (9107.T) sank 3.8 percent to 1,148 yen and Mitsui OSK Lines (9104.T) skidded 3.3 percent to 1,546 yen.

Trade picked up on the Tokyo exchange's first section, with 1.1 billion shares changing hands, compared with last week's morning average of 960 million.

Advancing stocks beat decliners by 884 to 658.

(Editing by Brent Kininmont)