* Nikkei turns flat as automakers gain on Renesas news
* Gains may be limited amid uncertainty over earnings-fund manager
* Trading thin before earnings, holidays overseas
By Ayai Tomisawa
TOKYO, April 22 (Reuters) - Japan's Nikkei stock average erased earlier losses to end flat on the day and posted small weekly gains on Friday after news that Renesas Electronics would resume operations at a key auto-chip factory triggered short-covering in a holiday-thinned market.
The fate of the market is seen hinging on upcoming earnings reports from next week, which will give investors their first hard evidence of the extent of the damage from a devastating earthquake and other disasters in March.
"The mood is generally pessimistic in the market, so investors are clinging on to any possible good news that comes out. That's why the market turned positive in the afternoon, even though it (the news on Renesas) didn't seem so important to me," said Yuuki Sakurai, CEO of Fukoku Capital Management.
While there was sporadic buying from Asian investors, there were fewer market participants on Friday with the United States and many other overseas markets closed for holidays, exaggerating price moves.
The benchmark Nikkei average ended almost flat at 9,682.21, while the broader Topix was also steady at 842.18. Both were in negative territory during morning trade.
For the week, the Nikkei was up 0.9 percent, while the Topix climbed 0.1 percent.
The Nikkei has hugged a tight range between 9,400 and 9,800 since early this month as market players wait for earnings reports next week that are expected to show the impact of last month's devastating earthquake on profits.
"I think there are still investors out there who haven't sold after the March earthquake because the timing was the end of book closing. If those who had a wait-and-see stance sell when companies give negative surprises, the market may see a sharp decline," said Hiroyuki Fukunaga, chief executive of Investrust.
Some investors worry that disruptions in supply chains could hobble manufacturers for a long time, boding ill for Japanese shares, which have been underperforming most other countries since the earthquake.
"I'm hearing from many companies that there are suppliers that will not recover, no matter what, and some of them are very hard to replace, so companies are scrambling for parts and also looking abroad," said Sakurai of Fukoku Asset.
On Friday, however, investors were cheered by the announcement from Renesas , a major supplier of chips to the auto industry, that it would resume operations at a factory in Ibaraki prefecture on June 15, ahead of the previously scheduled target of July.
"This news was a positive surprise. Investors have been sensitive to supply chain-related news and it surely triggered buying in automakers," said Makoto Kikuchi, chief executive officer of Myojo Asset Management.
Renesas gained 1.4 percent to 718 yen, while Toyota Motor rose 3.1 percent to 3,295 yen. Honda Motor added 2.3 percent to 3,145 yen and Nissan Motor advanced 3.6 percent to 773 yen.
Shares of Canon Inc , which reports on Tuesday, fell 1.4 percent to 3,510 yen. The Nikkei business daily said the camera and office equipment maker would likely report an 8 percent fall in first-quarter operating profit and cut its full-year forecast. [ID:nL3E7FL4FP]
Yaskawa Electric surged 7.3 percent to 926 yen after Credit Suisse raised its rating on the stock to "outperform" from "neutral", citing easing concerns about its ability to secure parts supplies. (Additional reporting by Antoni Slodkowski and Hideyuki Sano; Editing by Nathan Layne and Joseph Radford)