Toyota Motor will build an engine manufacturing plant in Miyagi Prefecture, the carmaker's first such factory in Japan's northeastern region.

Sources told Kyodo News Toyota also plans to start producing compact hybrid cars in Iwate Prefecture by the end of this year, enhancing its output in the Tohoku region in the hope that it would also help rebuild the economy in areas devastated by the March earthquake and tsunami.

Toyota president Akio Toyoda will announce the moves on Tuesday in Sendai, the capital of Miyagi Prefecture.

The city was badly hit by the disaster, the international airport in which people were trapped for several days is just reopening.

The engine production plant, the fifth in Japan for Toyota, is planned to be built possibly starting later this year next to the auto parts manufacturing factory of subsidiary Toyota Motor Tohoku in Taiwa town, Miyagi Prefecture, Kyodo said.

The new facility will produce around 200,000 engines for compact cars a year and supply affiliated vehicle assembly plants, according to the sources.

As for the fuel-efficient compact hybrids scheduled to be released around the end of this year, Toyota will manufacture them at Kanto Auto Works' factory in the Iwate town of Kanegasaki.

A prototype of the compact hybrid smaller than the Prius was exhibited at the Detroit show last January as the Prius C.

Toyota last week said three subsidiaries - Kanto Auto Works, Central Moto and Toyota Motor Tohoku - will start talks for a planned merger in July 2012.

The merger plan and the construction of the new engine plant are part of Toyota's efforts to improve cost effectiveness by converging resources for processes ranging from manufacturing planning to development and assembly in Tohoku, one of its three major domestic production bases, Kyodo noted.