TOKYO, Oct 9 (Reuters) - Toyota Motor Corp will aim to sell around 1.65 million vehicles in Japan this year, its
president said, providing a goal well below the company's initial target of 1.72 million and sending its shares lower.

Executives at the world's biggest automaker as recently as last week had stood by the original target, given at the end of 2006, citing hopes for a late rebound with the rush of new model launches.

"We want to go to around the middle of the 1.6-million-unit level," President Katsuaki Watanabe told a news conference to launch the new Corolla Rumion compact hatchback in Tokyo.

Shares in Toyota hit a day's low of 6,720 yen on the news, down 1.6 percent. Most other carmakers gained on the dollar's overnight rise against the yen.

Toyota's sales in Japan have been sliding along with the rest of the market, where many consumers have shifted to 660cc minivehicles. Excluding that segment, Japan's car market shrank 9.5 percent in September, the 27th straight month of decline from a year earlier.

Toyota's sales fell 4.2 percent, although the smaller drop meant its market share grew to 45.8 percent for the year to date.

Despite the weak sales, Toyota's domestic factories have been operating above standard capacity thanks to brisk export demand.