Japan's trade surplus for February shrank nearly 22-percent, the second straight monthly drop. The results are worse than forecast by many economists, who say the surprising data shows Japan's exports have not recovered to the extent expected. Some economists say the recent rise in oil prices, making imports more expensive, is partly to blame.

By region, compared with February last year, the trade surplus with Asia fell 31-percent while that with the United States dropped about 12.5 percent.

Japan's top automaker has set itself the goal of selling one million gasoline-electric hybrid vehicles a year. Toyota President Fujio Cho did not set a timeframe for that goal, but says the company intends to sell 300,000 hybrid vehicles globally during the next year or so.

Mr. Cho, at the Tokyo launch of two hybrid sport-utility models, says the vehicles are environmentally friendly, combining high performance with the world's best fuel efficiency in their category.

The world's number-two automaker released its first hybrid car nearly eight-years ago and now sells about 5,000 Prius sedans in Japan every month.

Toyota has also started production of a luxury sedan in China at a plant in Tianjin. It is the first time Toyota has taken production of the luxury Crown sedan overseas. The factory, a joint venture with the China FAW Group, is initially set to produce 100,000 cars a year, which will be sold in China.

Japan's Foreign Minister says free trade talks between Tokyo and Seoul, which stalled last September, are in jeopardy because of a territorial dispute. Nobutaka Machimura says the talks cannot resume in the current political climate.

Korean anger flared after the prefectural government in Shimane pressed a Japanese claim to a small island in the Sea of Japan, which South Korea controls.

Differences over agricultural issues stalled the talks, designed to achieve a free trade agreement between the Asian neighbors.