* Nikkei clings to gains in thin trade
* Eyes on movement of dollar against yen
* JAL down despite news Air France-KLM seeking stake
By Elaine Lies
TOKYO, Sept 15 (Reuters) - Japan's Nikkei stock average edged up 0.1 percent, buoyed by Toyota Motor Corp and other exporters as the yen held steady against the dollar, but worries that it may only be a brief respite limited gains.
Japan Airlines failed to add to gains made the previous day despite news that Air France-KLM was joining a list of suitors seeking a minority stake in the loss-making Japanese carrier.
"The market clearly fell too far yesterday, and we're seeing some short covering, but this sort of drifting is likely to continue for some time," said Hideyuki Ishiguro, a supervisor at the investment strategy department of Okasan Securities.
"We need to watch and see if the yen continues to be strong. Also, some investors are waiting to see what sort of policies the new government enacts, so some may refrain from buying."
Yukio Hatoyama will take office on Wednesday after his Democratic Party's huge election win over the long-dominant Liberal Democratic Party.
The Nikkei business daily said on Tuesday that Hatoyama has decided to appoint veteran lawmaker Hirohisa Fujii as finance minister.
"He is a former finance minister and has experience which is well respected by many people, so I don't think the choice of him will rock markets," said Yasunari Ueno, chief market economist at Mizuho Securities.
"We're looking at how he will wrestle with the task of coming up with the necessary funds to finance the party's pledges.
The benchmark Nikkei rose 11.64 points to 10,213.70 after falling 2.3 percent the day before. The broader Topix lost 0.2 percent to 931.94.
Trade was thin and choppy, with the benchmark briefly venturing into negative territory late in the morning when the dollar briefly fell back below 91 yen.
"Though the yen's rise appears to have halted for a while, it's hard to predict what's going to happen, and investors can't feel confident about the direction," said Takashi Ushio, head of the investment strategy division at Marusan Securities.
The dollar was up 0.1 percent at 91.02 yen.
JAL IN SPOTLIGHT
Air France-KLM is in talks to inject hundreds of millions of dollars into JAL, a source familiar with the matter said.
Delta Air Lines and American Airlines are in separate 'early stage' talks with Japan's carrier. All hope to gain access to its route network.
"I think this is a real plus, as there were some doubts about whether JAL would be able to carry out its restructuring plans alone," said Marusan's Ushio.
Meanwhile, JAL plans to cut overseas flights and increase personnel cuts over the next three years in a bid to slash operating costs by 30 percent, Japanese media said on Tuesday.
JAL lost 1.7 percent to 173 yen.
NEC Corp pared gains but still rose 0.7 percent to 302 yen after Japan's No.3 handset maker said it would take over the cellphone operations at Casio Computer Co and Hitachi Ltd as the struggling sector bands together to cut costs and survive a fast-shrinking market.
Casio shares gained 0.5 percent to 833 yen, while Hitachi was flat. All were off earlier highs.
Exporters, which led the Nikkei higher during early trade on short covering, pared their gains.
Canon Inc rose 3.5 percent to 3,570 yen, Honda Motor Co added 0.9 percent to 2,805 yen and Toyota gained 0.3 percent to 3,750 yen.
Trade was thin on the Tokyo exchange's first section, with 807 million shares changing hands, below last week's morning average of 1.1 billion.
Declining stocks outnumbered advancing ones, 928 to 573. (Additional reporting by Tokyo newsroom; Editing by Chris Gallagher)