* Isuzu soars on report Volkswagen considering taking stake in it
* Tepco almost unchanged after strong gains on Wednesday
* Brokerages fall on Credit Suisse's bearish report
* Nikkei hovers above 25-day moving average at 9,563.8
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, April 14 (Reuters) - Japan's Nikkei average inched up on Thursday but stayed in a narrow range as investors awaited earnings, while Isuzu Motors jumped on a report that Volkswagen was considering buying all or part of the Japanese truckmaker.
Isuzu climbed 6.5 percent to 311 yen and was the third-most actively traded share on the Tokyo Stock Exchange's main board. By the midday break it was trading at 2.3 times its average daily volume for the last 30 days. [ID:nL3E7FE011]
But the securities sector underperformed, with Nomura Holdings falling 1.4 percent to 418 yen after Credit Suisse cut its rating on the stock to "neutral" from "outperform", citing poor valuations and likely unfavourable earnings.
Tokyo stocks have regained around two-thirds of the losses suffered after the March 11 earthquake, but trade has turned more volatile and thinned out ahead of earnings reports that may pose more questions than give answers as many firms are poised not to give forecasts for the business year.
While the Nikkei remains more than 8 percent below its pre-quake levels, an index of Asian stocks outside Japan has gained 7 percent since the disaster.
"I look at the Nikkei level now and I'm not sure if it's low or high," said Yuuki Sakurai, CEO of Fukoku Capital Management, citing reasons such as the unclear situation at the quake-stricken nuclear plant, the difficulty of assessing damage to supply chains and the unpredictable impact of power cuts on industry.
The Reuters Tankan survey of 400 large firms found on Thursday that power shortages caused by the crippled Fukushima Daiichi nuclear plant had hit nearly 60 percent of local companies, disrupting production and supply chains. [ID:nnLME7DP00Q]
"I talked to some investors from Singapore yesterday, and I see a lot of uncertainty among foreigners as the impact of all this on the Japanese economy is very difficult to gauge," Sakurai added.
Business confidence, which had been recovering, fell back into negative territory for the first time this year, with the gloom spreading through both the manufacturing and service sectors, the Reuters Tankan showed.
The Nikkei benchmark was up 0.3 percent, or 23.94 points at 9665.12 in midafternoon trade after having edged down earlier. The broader Topix gained 0.4 percent to 847.59.
The Nikkei found support at its 25-day moving average at 9,563.77.
Among other brokerages, Daiwa Securities dropped 1.6 percent to 364 yen after Credit Suisse cut its target price to 360 yen from 430 yen to reflect expected poor earnings.
CARS LEND SUPPORT
Foreign investors bought a hefty 390 billion yen ($4.6 billion)of Japanese shares last week, the third-biggest weekly purchase in about a year, government data showed.
Some fund managers were more optimistic about the outlook for manufacturers, citing expectations for a sharp recovery in the second half of the business year.
"I look closely at carmakers, and their recent strong performance is lending support to the overall market," said Kiyoshi Noda, chief fund manager at MU Investments.
"We also see interesting moves in companies whose growth won't be affected much by the quake like Fanuc," added Noda.
Fanuc Ltd , an industrial robot maker with high exposure to emerging markets and with an almost 5 percent weighting in the Nikkei index, has gained some 7 percent in heavy volume over the last week.
The most actively traded share since the quake, Tokyo Electric (Tepco) , added 0.8 percent to 506 yen after soaring on Wednesday on a report that its liabilities stemming from the nuclear crisis may be capped.
The operator of Japan's crippled nuclear plant said on Wednesday it was still working on a detailed plan to end the country's nuclear crisis a month after it began, as tests showed radiation levels in the sea near the complex had spiked.[ID:nL3E7FD0XJ]
Toshiba Corp rose 2.5 percent to 406 yen after the head of the company said on Thursday that it sees limited impact in the 2010/11 financial year from the earthquake and tsunami that savaged northeast Japan and sparked a nuclear crisis.[ID:nLPE7DE01B]
Construction engineering company Modec Inc rose 5.3 percent to 1,533 yen after saying on Wednesday that Woodside Petroleum has named it as one of two companies to conduct front-end engineering design (FEED) for two dry tree units for the Browse liquefied natural gas project in Western Australia.[ID:nL3E7FD12P] ($1 = 83.890 Japanese Yen) (Editing by Chris Gallagher)