The head of Honda Motor Co. said on Thursday that sales in North America were stronger than anticipated as customers flocked to its fuel-efficient cars, while demand in the lackluster Japanese market was in line with expectations.

We are struggling to supply enough cars in North America, CEO Takeo Fukui told reporters after a news conference at which Japan's third-biggest auto maker unveiled the remodeled Stream minivan for the domestic market.

Fukui said the supply shortage in North America, where Honda makes most of its profits, would likely continue for some time. Honda will not have new production capacity until a new assembly plant in Indiana starts in late 2008.

Rival Toyota Motor Corp. is also enjoying robust growth in the key region, but faces soft sales at home as customers drift toward the 660cc minicar segment dominated by Suzuki Motor Corp. and Daihatsu Motor Co.

Underscoring that trend, the Asahi newspaper reported on Thursday that Toyota would likely cut its 2006 domestic sales target to more than 1.7 million units from 1.78 million. It said Japan's top auto maker would make an announcement at its annual mid-year news conference, due on July 20.

Toyota declined to comment on the report.

Japan's second-ranked Nissan Motor

Co. said last month it could miss its domestic sales target by 5 percent for 2006/07, citing a shift in demand to the minivehicle segment, although it kept its global sales forecast intact.

Overall sales of minivehicles in Japan grew 4.7 percent in the first half, while the rest of the market declined 3.8 percent.

In contrast, Fukui said Honda's domestic sales since the start of the new business year in April had been going roughly as planned thanks to solid demand for the Civic sedan and Zest minicar.

We intend to sell the amount projected at the start of the business year as planned, he said. Honda has forecast domestic sales of 720,000 units for the year to March 2007, up 3.4 percent from last business year.

For the January-May period, Honda's sales in Japan fell 3.8 percent from the same period last year to 284,813 units.

But another official said demand should pick up with the roll-out of a total of four or five new models this business year, including the Stream, which goes on sale in Japan from Friday. Honda expects monthly sales of 5,000 units for the model.

Honda's Japan sales may turn around thanks to the new Stream and a boost from minicars, and keep from becoming a major negative factor for earnings, JP Morgan auto analyst Takaki Nakanishi wrote in a report on Wednesday.

In the United States, Honda's sales rose 7.1 percent to 741,227 units for the first half of 2006, and it has forecast a record 1.51 million units for the whole year, mainly fueled by the entry-level Fit compact car and the Acura RDX premium crossover.

Sales of the new Civic and other fuel-sipping four-cylinder engine cars were benefiting from high gasoline prices, Fukui said, adding that a shift away from big SUVs was also fanning sales of the CR-V crossover despite its reaching the end of its model life.

Shares in Honda slipped 0.56 percent to 3,560 yen, faring better than other Japanese auto stocks. Toyota fell 2.02 percent, Nissan shed 1.55 percent, while the Nikkei average <.N225> lost 1 percent.

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