Japan Nikkei flat as trading firms sag, drugs strong

(Updates to midmorning)

TOKYO, May 23 (Reuters) - Japan's Nikkei stock average was nearly flat on Friday, caught between a rise in pharmaceuticals on news that Roche Holding AG (ROG.VX) will increase its stake in partner Chugai Pharmaceutical Co Ltd (4519.T) but undermined by trading firms hit by lower oil prices.

Energy shares also suffered as oil retreated from Thursday's record high above $135 a barrel, with shippers, which powered sharply higher last week, were also dented as the cumulative effect of oil's rise bit more deeply. Konica Minolta Holdings Inc (4902.T) surged after it said on Thursday it plans to spend up to 10 billion yen ($96 million) to build a new production facility for high-tech film used to make LCD panels in 2009. [ID:nSP138356] Stocks gained some support from a tumble in Japanese government bond futures, which fell more than a full point on Friday.

"We're seeing a bit of a shift in funds from bonds to stocks," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

"As for other things, drug firms are gaining on the Chugai news, since a big foreign firm like Roche saying it will take a stake really has an impact."

The benchmark Nikkei gained just 9.35 points to 13,987.31. The broader Topix was down 0.2 percent at 1,377.32.

DRUGS HIGHER

Chugai climbed 4.3 percent to 1,665 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 2.1 percent to 5,870 yen and Astellas Pharma Inc (4503.T) gained 1.9 percent to 4,340 yen.

Konica Minolta gained 3.9 percent to 1,817 yen.

Toyota Motor Corp (7203.T) and other exporters rose as the dollar climbed back above 104 yen. A weaker yen makes Japanese goods more competitive overseas.

Toyota gained 1.2 percent to 5,240 yen and Sony Corp (6758.T) was up 1.2 percent at 5,090 yen.

Trading houses, which surged recently on high oil and commodity prices, slipped, with Mitsubishi Corp (8058.T) sliding 3.3 percent to 3,780 yen and Mitsui & Co (8031.T) down 3.5 percent at 2,655 yen.

Shippers also dragged, led down by Mitsui OSK Lines (9104.T), which fell 3.4 percent to 1,547 yen. (Reporting by Elaine Lies, Editing by Brent Kininmont)