* Nikkei on track for best quarter since July-Sept 1995
* Retail investors' net stock buying hit 2-yr high last week
* Bridgestone jumps after raising earnings outlook
* Suzuki Motor up on possible VW cooperation deal
By Masayuki Kitano
TOKYO, June 26 (Reuters) - Japan's Nikkei stock average rose 0.8 percent on Friday, with tyremaker Bridgestone surging after it lifted its earnings outlook and Suzuki Motor Corp jumping after a source said Volkswagen was interested in a tie-up.
Nippon Oil Corp climbed over 3 percent following a newspaper report that it and other Japanese companies are in the final stage of talks with Iraq to win the development contract for Iraq's huge Nassiriya oilfield.
The benchmark stock average was also supported after better- than-expected earnings from U.S. retailer Bed Bath & Beyond helped revive a sense that the U.S. recession may be starting to ease.
The Nikkei, which hit an 8-month intraday high of 10,170.82 earlier this month, is on track for its best quarter since the July-September quarter of 1995, having climbed 22 percent since the end of March.
The Nikkei may be setting sights on a rise to levels above 10,000 again, said Toshihiko Matsuno, an assistant general manager at SMBC Friend Securities' investment research department.
"Even if such a recovery does occur, however, there will need to be some support from fundamentals to chase the market higher," Matsuno said.
Next week the focus will be on economic indicators, including the Bank of Japan's "tankan" business sentiment survey, he said.
The Nikkei rose 81.31 points to 9,877.39, having risen 0.9 percent for the week.
The broader Topix rose 0.8 percent to 926.80.
Japan's Daiwa Securities Group said after the market closed on Friday that it will raise about 240 billion yen ($2.5 billion) in a share issue.
RETAIL INVESTORS
One positive factor for the Nikkei's outlook is the fact that retail investors trading with cash were net buyers of equities last week, said Masayoshi Okamoto, head of dealing at Jujiya Securities.
Tokyo Stock Exchange data shows that retail investors bought a net 502.7 billion yen in equities on the TSE's first section last week, their biggest net buy since March 2007.
Roughly half of that buying was by investors trading with cash, and half was by investors buying on margins.
Okamoto said cash-based retail investors were known for being proficient at buying on dips. "They are geniuses of contrarian trading," Okamoto said, adding that such investors had been buyers when the Nikkei fell to troughs in March and last October.
"Based on the way cash-based retail investors have moved in the past, it is possible to think that these levels might be the starting point, rather than being the highs for the time being," Okamoto said, referring to the Nikkei's current levels.
Suzuki Motor rose 5.5 percent to 2,195 yen after a source familiar with the matter said Volkswagen is exploring a potential cooperation deal with Suzuki as a way to boost its expertise in the area of ultra-small cars.
Nippon Oil rose 3.1 percent to 570 yen after the Yomiuri newspaper said it, oil and gas field developer Inpex and plant engineering firm JGC Corp were likely to win the oilfield contract.
Inpex rose 1.8 percent to 754,000 yen and JGC gained 2.9 percent to 1,581 yen.
Bridgestone jumped 8.5 percent to 1,520 yen after it lifted its operating profit forecast for 2009 by 24 percent on Thursday, saying the yen is less strong than it had expected.
The upgraded outlook also reflects improved prospects for demand in Japan and Europe in the second half of the year, deeper-than-targeted cost cuts and falls in the prices of materials, a Bridgestone spokesman said. (Additional reporting by Elaine Lies; Editing by Joseph Radford)