Nikkei claws higher; Nippon Oil, Suzuki Motor gain

* Nikkei up on hopes that recession easing, but sluggish

* Profit-taking emerges after sharp gains on Thursday

* Nippon Oil climbs on report of Iraq oilfield talks

* Suzuki Motor up on possible VW cooperation deal

TOKYO, June 26 (Reuters) - Japan's Nikkei stock average clawed 0.2 percent higher, buoyed by hopes the U.S. economic recession may be easing and higher oil and metals prices, which lifted Mitsui & Co (8031.T) and other resource shares.

Nippon Oil Corp (5001.T) jumped over 4 percent after a newspaper reported 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. [ID:nT306956]

Suzuki Motor (7269.T) climbed after a source familiar with the matter said Volkswagen (VOWG.DE) is exploring a potential cooperation deal with Suzuki as a way to boost its expertise in the area of ultra-small cars. [ID:nLP51283]

Though market analysts had predicted sharp gains prior to the opening, with the benchmark Nikkei .N225 likely to try the 10,000 level, rises were sluggish as investors moved to lock in profits after the average posted its best day in a month on Thursday and rose 2.2 percent.

The Nikkei gained 18.23 points to 9,814.31, while the broader Topix rose 0.4 percent to 923.45.

"The market climbed yesterday mainly on demand factors and not on fundamentals, and investors are moving to take profits ahead of the weekend," said Hiroaki Osakabe, fund manager at Chibagin Asset Management.

But sharp losses were unlikely after the Nikkei on Thursday climbed back above its 25-day moving average, which now comes in around 9,700 and will serve as support the way it did throughout the benchmark's three-month rally from March.

"Everyone recognises that the market is heading for recovery, and this is likely to be verified when Japanese companies start reporting results next month. The mood is improving," said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.

Better-than-expected earnings from U.S. retailer Bed Bath & Beyond (BBBY.O) helped revive a sense that the recession may be starting to ease.

"The market is going to take heart from this, which will help boost stocks along with expectations that next week's Japanese indicators -- including the Bank of Japan tankan -- will also show signs of recovery," Nishi added.

Some individual shares shone amid a general lack of market direction.

Suzuki surged 6.5 percent to 2,215 yen, though a Suzuki spokesman said he could not comment on the reported tie-up with Volkswagen because he had not heard of talks about any such deal. [ID:nT277797]