Japan's Toyota Motor Corp plans to launch a hybrid compact for around 1.5 million yen ($15,760) in Japan in late 2011, broadening its hybrid car line-up, the Asahi newspaper reported on Tuesday.

Demand for gasoline-electric vehicles has jumped in Japan, helped by government tax breaks and subsidies on cleaner cars, and as Toyota and rival Honda Motor Co have lowered prices on their flagship hybrids -- to as low as 2.05 million yen for Toyota's Prius and 1.89 million yen for Honda's Insight.

Honda's new Insight became the first hybrid to top the monthly ranking of best-selling cars in Japan in April, while Toyota's fully remodeled Prius, which debuted three months after the Insight, was No.1 in May.

Toyota's new hybrid-only compact will use the platform and engine of the Yaris compact, which will be fully remodeled ahead of the new hybrid's launch, and feature a more cost competitive and fuel-efficient hybrid system than that of the Prius, the Asahi said.

Toyota may produce the new hybrid not only in Japan but also in France for sale in Europe, the daily said.

The new Toyota hybrid compact is expected to compete with the hybrid version of Honda's Fit compact, which will debut in Japan next year, the newspaper said.

Toyota will also raise its daily production target in Japan to 13,500 units in September and 13,700 in October, nearly double the levels in February-April, as government subsidies in and outside Japan help boost demand, the daily said.

A Toyota spokeswoman said the company could not confirm the report as it reveals product and production plans only through official announcements.

Shares of Toyota were up 0.3 percent to 3,800 yen, while the benchmark Nikkei share average was down 0.2 percent.

($1=95.17 Yen)

(Reporting by Yumiko Nishitani; Editing by Chris Gallagher)

Toyota Launch Japan