Japan's Nikkei average inched up on Thursday, barely stirring through the morning session as investors awaited a European Central Bank policy review in hope of new measures to tackle the euro zone debt crisis.

Embattled TV maker Sharp Corp <6753.T> was the most-traded stock on the main board, dropping 5.7 percent after Moody's Investors Service cut its short-term debt rating to 'junk' and further curtailing the company's access to credit as it looks for money to pay its debts.

The Nikkei <.N225> tiptoed up 0.1 percent to 8,684.92 by the midday break. If it closes in negative territory, it would mark its sixth straight session of losses, its longest bearish run since early July.

"We have seen a pick-up in activity. We have got one of the better flows we have seen for a while ... no real sector tilt. The U.S. was pretty benign, and we were down six sessions out of seven. We are probably due for a bounce," a senior dealer at a foreign bank said.

"Our flow is balanced. If our flow is representative of what's going in the market, our flow suggests it's going to be flat."

Sources told Reuters that the ECB is ready to waive seniority status on government bonds it buys under a new programme which it is set to agree on at Thursday's Governing Council meeting.

Betting on a quick fix from the ECB to bring down punishingly high borrowing costs for Spain and Italy and another round of stimulus from the U.S. Federal Reserve, the Nikkei had rebounded 10.8 percent from a seven-week low on July 25 to August 20.

Since then the benchmark has fallen 5.8 percent, although it is still up 2.7 percent for the year.

Market players say ECB action is now priced into the market, but some remain uneasy about the consequences of the bank's purchases of sovereign debt.

"If the ECB buys Spanish and Italian bonds, it's likely to ultimately be a bad thing for Spain and its banks as it will scare away other investors from buying their bonds," said Fumiyuki Nakanishi, general manager of investment research at SMBC Friend Securities.

Reinforcing concerns of falling global demand, the Nikkei business daily said Asahi Kasei <3407.T> was keeping production 30 percent under capacity for a plastic used in home electronics, cars and clothing as the euro zone debt crisis and a slowdown in China hampered sales. The stock fell 1.8 percent.

Bucking the market was Canon Inc <7751.T>, which was bumped up 1.3 percent after the Nikkei business daily said it will widen its involvement in the ophthalmological market by introducing optical coherence tomography (OCT) systems.

Heavyweight Softbank Corp <9983.T> also offered some support, up 2.2 percent as investors were upbeat of the company after Chairman and CEO Masayoshi Son's presentation at the Bank of America Merrill Lynch conference on Wednesday. It was the second-most traded stock.

The broader Topix <.TOPX> index was flat at 718.01 on Thursday morning in moderately low trade. Volume was at 41.7 percent of the full-day 90-day average.

($1 = 78.3150 Japanese yen)

(Additional reporting by Dominic Lau; Editing by Eric Meijer)