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 |  Jun 30 2010, 8:49 AM

Along with a long-rumored hybrid technology partnership between Toyota and Subaru, Japan’s largest automaker is also preparing to supply Subaru with a new sub-compact model. Japan’s Nikkei is reporting that the new model will be based on the Toyota Ractis, but will be built entirely by Toyota.

The deal seems to be part of a continued partnership between the two automakers, with long-standing rumors of a shared sports car, referred to as the FT-86 or FR-S. Of note, Toyota supplies the Scion xB to Subaru, where it is sold in Japan as the Dex. Toyota also owns a 16.5 percent stake in Subaru parent company Fuji Heavy Industries.

Initially Toyota will supply roughly 10,000 models to Subaru each year, using the current Toyota powerplants, including either a 1.3-liter or 1.5-liter 4-cylinder. The move by Subaru is seen as a reaction to increasing trends towards small vehicles. It’s also likely a way for Subaru to meet increasingly strict fuel economy standards.

There are no plans for Subaru to offer this model in North America, although we have to think that eventually Subaru, like all other automakers, will have to offer sub-compacts globally in the near future.

[Source: Nikkei via Green Car Congress]