* Buying momentum continues with the Nikkei above 10,000
* M'bishi Heavy jumps on upgrade, power plant deal report
* Nomura climbs on upgrade, rights issue mandate
By Aiko Hayashi
TOKYO, June 12 (Reuters) - Japan's Nikkei average rose about 1 percent to hit its highest level in eight months on Friday as improving confidence about the health of the global economy spurred broad-based gains.
Mitsubishi Heavy jumped more than 6 percent, helped by a report that it was close to securing a deal to construct the world's first large-scale coal gasification power plant in Australia. It was also helped by a brokerage upgrade.
Nomura Holdings, Japan's largest brokerage, jumped after Merrill Lynch hiked its rating on the firm to "buy" from "neutral", saying in a report that the company was likely to turn profitable in the financial year ending in March 2011.
"The Nikkei could be trading between 10,000 and 12,000 by the end of this year, as the economic outlook for emerging countries such as China and India is pretty bullish," said Yoku Ihara, manager at Retela Crea Securities.
"But after having reached the 10,000 peak, investors are trying to decide whether to have a break around here or catch their breath and keep going."
The benchmark Nikkei climbed 1 percent to 10,076.28, after rising as high as 10,089.15, its highest point since Oct. 7 and more than 40 percent higher than its March bear market low.
The broader Topix added 0.7 percent to 946.87.
Trade was active, partly due to trade linked to the settlement of Nikkei futures and options contracts. Those expiring in June likely settled at 10,147.65, Tokyo market participants said earlier in the day, citing estimates by local brokerages.
On Thursday, the Dow Jones industrial average gained 0.4 percent, as crude oil surged briefly to more than $73 a barrel and lifted shares of resource companies, such as Chevron.
A sharp drop in interest rates also aided Wall Street as stocks have tracked bonds of late, with higher rates causing concern among investors as they could raise company borrowing costs and slow the economic recovery.
Data also showed U.S. May retail sales rose 0.5 percent, though the rise was mostly due to higher gasoline prices.
NOT SO HEAVY
Mitsubishi Heavy jumped 6.1 percent to 415 yen after the Nikkei business daily said it looked like it would close the deal in Australia with orders from the project estimated at around 200 billion yen ($2.05 billion).
Mitsubishi UFJ Securities also hiked its rating on the heavy machinery maker, saying a shift to cleaner energies could propel the firm to growth.
Shares of Nomura climbed 5.1 percent to 916 yen, after the brokerage won its first rights issue mandate in Europe this year, underwriting a 420 million Swiss franc ($390 million) deal for Swiss flavour and fragrance maker Givaudan
A wide range of shares advanced, with clothing retailer Fast Retailing, a popular stock among individual investors, gaining 1.6 percent to 12,680 yen.
GS Yuasa, a lithium-ion battery maker and a favourite pick among investors as an environment-linked stock, advanced 5.1 percent to 1,040 yen.
Mitsubishi UFJ Financial Group, Japan's biggest bank, advanced 2.7 percent to 658 yen.
But NEC Electronics Corp slid 2.7 percent to 981 yen after the Nikkei business daily said the company was likely to end the April-June quarter with a group operating loss of about 20 billion yen ($204.5 million), as sales of chips for use in information devices and automobiles remain weak.
Some 2.4 billion shares changed hands on the Tokyo exchange's first section, above last week's morning average of 1.2 billion.
Advancing stocks outnumbered declining ones by 879 to 648. (Editing by Hugh Lawson)