Honda is set to launch a hybrid sedan with a best-in-class fuel economy of 29km per litre, reports The Nikkei newspaper.

This vehicle will be developed as a fully re-modelled Japanese version of the Accord sedan, which will be offered as a hybrid-only in its domestic market.

Its mileage will outpace the 23.4km per litre and 23.2km per litre of Toyota’s Camry and Crown hybrids. It will also beat Honda’s own Insight hybrid's 27.2km per litre.

The Accord Hybrid will feature a drive system based on two electric motors and a gasoline engine, the Nikkei said. Toyota has been using this configuration, but Honda has employed a simpler hybrid system that uses a single motor to assist the gasoline engine.

The system can run the vehicle off the motors alone and harness energy generated while decelerating for later use to boost fuel economy. Honda is looking to sell around 10,000 units a year in Japan.

The Accord was once Honda's flagship vehicle. But as the sedan segment has shrunk, domestic sales fell from 100,000 units a year in the 1970s and '80s to around 3,200 in 2011.