* Caution looms as earnings season heats up; BOJ, Fed eyed
* Canon, Fujitsu jump after bullish earnings reports
* Eyes on earnings outlooks amid strong yen -analysts
By Aiko Hayashi
TOKYO, Oct 28 (Reuters) - Japan's Nikkei edged down on Thursday as investors were reluctant to trade actively at the height of the earnings season and before a Bank of Japan policy meeting, but shares of firms that have reported strong results were in dmeand.
Canon Inc jumped more than 4 percent after the company raised its full-year operating profit forecast, while Fujitsu Ltd rose after beating expectations with a doubling of quarterly operating profit.
The market was awaiting the outcome of the day's BOJ meeting, at which it is expected to cut its growth forecast and predict a very slow exit from deflation, signalling it is ready to ease its policy further in months ahead if the yen's climb threatens to stunt growth.
"Shares of firms with bullish earnings are being snapped up, but that hasn't spread to similar stocks or sectors as investors are generally more concerned about the implications from today's BOJ meeting and the U.S. Federal Reserve meeting next week," said Mitsuo Shimizu, deputy general manager at Cosmo Securities.
"But Canon revised up its earnings forecast despite the strong yen -- it even lowered its dollar/yen rate assumption to 80 yen. If more companies were to follow suit, that would likely provide a lift to the overall market going forward."
By the midday break, the benchmark Nikkei fell 0.1 percent to 9,381.26, while the broader Topix declined 0.2 percent to 816.36.
The Nikkei's support is seen as solid at last week's intraday lows around 9,310-9,320 and the upper level of its daily Ichimoku cloud near 9,300. Some technical resistance likely stands at the 25-day moving average, now at 9,479.
The dollar rallied as investors unwound bets against the greenback before a highly anticipated U.S. Federal Reserve meeting next month. The dollar hit a two-week high just shy of 82 yen in the previous session.
In early Asia trade, the dollar traded at 81.65 yen.
Market participants have begun to scale back expectations of the Fed's intentions after The Wall Street Journal said on Wednesday it expected the Fed to commit to bond purchases worth only "a few hundred billion dollars" and stagger them over several months.
That compared with a Reuters survey this month that found markets expecting the Fed to announce a so-called QE2 stimulus of between $500 billion and $1.5 trillion at its Nov. 2-3 policy meeting.
The Fed's move and its impact on the dollar will largely determine further action from the Japanese central bank, but having just eased policy three weeks ago, the BOJ looks certain to refrain from new steps when it meets on Thursday. The focus will thus be on its twice-yearly economic outlook.
EARNINGS BOOST
Canon jumped 4.4 percent to 3,780 yen after the company staved off the impact of a stronger yen and raised its full-year outlook as strong sales of office equipment and digital cameras helped it beat forecasts with a 74 percent jump in quarterly profit.
Canon also revised its dollar-yen exchange rate assumption to 80 yen from 90 yen. Many Japanese firms have set their dollar rate assumptions at 90 yen.
Fujitsu Ltd, climbed 4.2 percent to 565 yen after Japan's largest IT services vendor beat expectations with a doubling of quarterly operating profit, though it cut its annual sales outlook as it copes with a firmer yen and corporations rein in IT spending.
Yamada Denki Co gained 2.7 percent to 5,290 yen after the consumer electronics retailer raised its full-year net profit forecast by 16 percent, getting a boost from solid demand for TVs as well as refrigerators and air conditioners during an unusually hot summer.
But JX Holdings, which owns Japan's top copper smelting company Pan Pacific Copper, fell 0.8 percent to 472 yen after copper and other industrial metals prices dropped sharply the previous day.
Mitsui Mining & Smelting declined 1.6 percent to 246 yen and Sumitomo Metal Mining fell 0.5 percent to 1,286 yen.
Hedge funds and other investors have been shifting away from metals and other commodities as the dollar advances due to speculation that monetary easing in the United States will not be as pronounced as originally thought. (Editing by Joseph Radford)