Toyota Motor Corp unveiled on Wednesday the third-generation Vitz hatchback, its top-selling gasoline car in Japan, saying the subcompact gets best-in-class mileage of 26.5 km/litre.
The Vitz competes with segment leader Honda Motor Co's Fit and Nissan Motor Co's March, and sold about 125,000 units in Japan in the business year that ended in March 2010.
Its fuel economy, measured under Japanese test methods, beats the March's 26.0 km/litre and the Fit's 24.5 km/l, Toyota said.
Toyota set a monthly sales target of 10,000 Vitz cars in Japan. Pricing starts at 1.06 million yen ($12,660).
A day earlier, the world's biggest automaker forecast its sales in Japan to fall 17 percent to a 37-year-low of 1.3 million units in 2011, worse than a 9.9 percent drop predicted for the overall market by the Japan Automobile Manufacturers Association.
Government subsidies favouring gasoline-electric and other advanced vehicles had fuelled sales of Toyota's Prius hybrid to record levels until the stimulus expired in early September.
Toyota's domestic sales fell 35 percent in November from a year earlier, faring worse than most other brands, although a separate incentive exempting hybrids from some taxes will run until early 2012.
Cumulative sales of the Vitz, called the Yaris in some markets, have exceeded 3.5 million units in more than 70 countries since the first-generation version was launched in 1999.
(Reporting by Chang-Ran Kim; Editing by Chris Gallagher)