New reports have emerged from Japan confirming that Toyota is working on a new low cost sports car scheduled to go on sale before the end of the decade and priced around two million yen (US$16,780). Toyota will build the car with help from Fuji Heavy Industries (Subaru’s parent company), who the Asahi newspaper reports will be providing one of its trademark boxer engines.

Toyota bought a small 8.7% stake in Fuji back in 2005 and has since supplied it with small cars built by its Daihatsu subsidiary. This new project will see Fuji return the favor with the supply of a 2.0L horizontally opposed engine, which was chosen because of its lower center of gravity, low cost and smoothness.

Earlier reports gave some vital details about the car including its size, which is expected to be under 4m in length and 1.7m across. Final output is said to be around 120hp in a body that’ll tip the scales at just 1,000kg. The new model would be a spiritual successor to the AE86 (pictured above), which was immortalized in the anime series Initial D.

Subaru fans were initially disappointed that Toyota's involvement would make the company boring but it looks like the opposite will be true. Considering the Toyota group has no pure sports car, this would be a good entry level model to spur more interest in the brand.