Nikkei edges higher, holding breath for U.S. vote

(Updates to midmorning)

TOKYO, Oct 2 (Reuters) - Japan's Nikkei stock average edged up 0.2 percent on Thursday, led higher by Canon Inc (7751.T) and other exporters, but activity was limited as the market awaited a U.S. Senate vote on the financial bailout plan. Fujitsu Ltd (6702.T) surged 5.5 percent after a company source said the firm is in talks with Western Digital Corp (WDC.N) and others on the sale of its money-losing hard drive business, though Fujitsu denied that it was now approaching an agreement or arranging a sale. [ID:nT351147] Financials climbed, and investors also turned to defensive shares in the face of growing worries about the global economy. But Honda Motor Corp (7267.T) and other automakers slipped on increasing gloom about the health of the U.S. economy.

Market participants said the market was widely expecting the bill to pass, with attention now shifting to Europe and the overall global economic situation.

"In the end, the main focus is on economic problems, and Europe appears to be in terrible shape," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

"It's impossible to avoid the sense of an economic slowdown."

The benchmark Nikkei had gained a scant 33.57 points to 11,401.83. The broader Topix was up 0.1 percent at 1,102.09.

A vote was due in the Senate for sometime after 8:30 a.m. local Japan time, or 2330 GMT, on the $700 billion bill. [ID:nL1596334]

"If the bill doesn't pass, of course the market is likely to see some sharp selling, but that may be short-lived," said Yutaka Miura, senior technical analyst at Shinko Securities.

"Markets are becoming less likely to move simply on expectations for this, with investor attention shifting more to worry about the health of the Japanese and U.S. economies."

Canon was up 2.8 percent to 4,090 yen, becoming one of the top three contributors to the Nikkei 225. Industrial robot maker Fanuc Ltd (6954.T) climbed 1.8 percent to 7,950 yen.

Financial shares also rose, with Mitsubishi UFJ Financial Group (8306.T) up 1.7 percent to 940 yen and Mizuho Financial Group (8411.T) rising 3.1 percent to 463,000 yen.

Otherwise, the market was buoyed by broad buying of defensive shares such as drugmakers, with Takeda Pharmaceuticals Co Ltd (4502.T) gaining 3.3 percent to 5,700 yen and Astellas Pharma Inc (4503.T) up 2.6 percent to 4,700 yen.

Cosmetics firm Kao Corp (4452.T) rose 2.5 percent to 2,915 yen. (Reporting by Elaine Lies; Editing by Chris Gallagher)