Toyota Motor Corp (7203.T) plans to raise its production in Japan for the first time in 16 months in November thanks to a recovery in auto sales driven by government incentives, the Asahi newspaper reported on Tuesday.

But the boost is likely to be temporary, as the world's largest automaker is expected to reduce output again early next year when the incentive programs end, the Asahi said, and analysts said Toyota still needs to cut its capacity in Japan.

It's good news, even though the output lift is temporary. It shows inventory reduction has been going fast thanks to the government incentives, said Yoshihiko Tabei, auto analyst at Kazaka Securities.

But the effects of the incentives won't last long. Toyota has yet to reduce capacity in Japan and the United States. So from now we may see employment conditions put under more pressure. It's a jobless recovery, he said.

Shares of Toyota slipped 0.5 percent to 4,050 yen on Tuesday, in line with the broader TOPIX index .TOPIX.

Toyota is seeing a recovery in sales of its fuel-efficient cars following the government measures to promote such cars.

Its Prius hybrid was Japan's best-selling car in July for the second straight month, but customers placing orders have to wait about eight months before getting their cars due to strong demand and a shortage of batteries.

Toyota plans to make 14,500 vehicles per day in November, the first year-on-year rise since July 2008, the Asahi reported.

The company would not confirm or deny the reported plan as it does not disclose production plans ahead of time for each month, a Toyota spokeswoman said. The company made 14,407 vehicles per day in November last year, she said.

For October the car maker aims to roll out 14,500 cars per day, up 770 from its previous plan set in July, the paper said.

But Toyota remains cautious about the outlook, as it is expected to cut its daily production back to around 12,000 vehicles, its break-even level, in spring, the newspaper said.

Last month, Toyota raised its annual global vehicle sales target by 100,000 to 6.6 million on the back of demand in Japan and forecast a slightly smaller operating loss.

(Reporting by Yumiko Nishitani and Taiga Uranaka; Editing by Lincoln Feast)