Toyota questions hybrid approach

They sell the Echo/Vitz/Yaris in Japan with an auto-stop/start system via a lithium-ion battery - it's very popular. They also recently showcased an 87 mpg concept car hybrid based on the Yaris (called the ES3) - though no word of it heading for production.

Other manufacturers in Japan sell very small hybrids - such as the two seater Suzuki Twin hybrid.

Once an established and viable market appears for smaller hybrids, I think Toyota will likely jump in to capitalise. For the moment though, the battery and power electronics manufacturers can't come close to matching demand for these items, so prices will likely remain high for a good while to come. Only when production volumes for these items increase are the costs likely to come down to the point where they can economically be put into smaller cars.