Corp Governance Report 1/2

Toyota Motor Corporation
25 December 2006

                                 (Translation)



                                                               December 25, 2006
                                                        TOYOTA MOTOR CORPORATION
                                                               Katsuaki Watanabe
                                                  Telephone Number: 0565-28-2121
                                                               Code Number: 7203
                                                         http://www.toyota.co.jp





Corporate governance at Toyota Motor Corporation ('Toyota') is as follows:



I.      Toyota's Basic Policy on Corporate Governance and Capital Structure,
Business Attributes and Other Basic Information



1.     Basic Policy



        Toyota has positioned the stable long-term growth of corporate value as
a top-priority management issue.  We believe that in carrying this out, it is
essential that we achieve long-term and stable growth by building positive
relationships with all stakeholders, including shareholders and customers as
well as business partners, local communities and employees, and by supplying
products that will satisfy our customers.  This position is reflected in the
'Guiding Principles at Toyota', which is a statement of Toyota's fundamental
business policies.  To explain the Guiding Principles in greater detail, in
January 2005, Toyota adopted and presented its statement, 'Contribution towards
Sustainable Development' as the guideline to the 'Guiding Principles at Toyota'.
  We are working to enhance corporate governance through a variety of measures
designed to further increase our competitiveness as a global company.



2.     Capital Structure


Percentage of Shares Held by Foreign Investors:           Not less than 20% but less than 30%



(Description of Major Shareholders)
                  Name of Shareholders                      Number of Shares Held     Ownership Interest
                                                                            (Shares)                   (%)
Japan Trustee Services Bank, Ltd.                                        275,673,488                  7.64
The Master Trust Bank of Japan, Ltd.                                     209,613,068                  5.81
Toyota Industries Corporation                                            200,195,022                  5.55
Hero and Company                                                         133,454,319                  3.70
Nippon Life Insurance Co.                                                131,604,815                  3.65
State Street Bank and Trust Company                                      119,382,108                  3.31
Trust & Custody Services Bank, Ltd.                                      103,307,043                  2.86
Tokio Marine and Nichido Fire Insurance Co., Ltd.                         83,821,267                  2.32
Mitsui Sumitomo Insurance Co., Ltd.                                       65,166,920                  1.81
Denso Corporation                                                         58,678,704                  1.63





3.     Business Attributes


Stock exchange and section                            Tokyo: 1st Section, Osaka: 1st Section, Nagoya: 1st
                                                      Section, Fukuoka: Existing Market, Sapporo: Existing
                                                      Market
Fiscal year end                                       March
Line of business                                      Transportation equipment
Number of employees (consolidated)                    Not less than 1000 persons
Sales (consolidated)                                  Not less than JPY 1 trillion
Parent company                                        N/A
Number of consolidated subsidiaries                   Not less than 300 companies



4.     Other particular conditions that may materially affect corporate
governance



-





II.      Corporate Governance System of Management Business Organization, Etc.
for Management Decision Making, Execution of Duties and Management Audit



1.     Organization structures and organizational operations


Organizational form                                   Company with a Board of Corporate Auditors



(Directors)
Chairman of the Board of Directors:                   Chairman (excluding concurrently serving as President)
Number of Directors:                                  25 persons
Election of Outside Directors:                        Not elected


    Reason for adopting the current system



       With respect to our system regarding directors, we believe that it is
important to elect individuals that comprehend and engage in Toyota's strengths,
including commitment to manufacturing, with an emphasis on frontline operations
and problem solving based on the actual situation on the site (Genchi Genbutsu).
Toyota will consider the appointment of outside directors should there be
suitable individuals.



(Auditors)
Establishment or non-establishment of a Board of       Established
Corporate Auditors:
Number of Corporate Auditors:                          7 persons


    Cooperative relationships between Corporate Auditors and Independent Accountants



       Corporate Auditors receive reports from Independent Accountants on audit
plans, methods and results of auditing periodically at the Board of Corporate
Auditors.  They also hold meetings and exchange their opinions as they consider
necessary concerning auditing in general.


    Cooperative relationships between Corporate Auditors and Internal Audit Division



       As for internal auditing, a specialized independent department evaluates
the effectiveness of internal controls over financial reporting.  Corporate
Auditors receive reports from the department on audit plans, methods and results
of auditing periodically or whenever necessary.


Election or non-election of Outside Corporate          Elected
Auditors:
Number of Outside Corporate Auditors:                  4 persons


    Relationship with the Company (1)


Name                             Attribution                       Relationship with the Company (*1)
                                                                   a    b    c    d    e    f    g    h    i
Yasutaka Okamura                 Attorney-at-law                                  X                   X
Yoichi Kaya                      Academic                                         X                   X
Yoichi Morishita                 Comes from other company                         X                   X
Akishige Okada                   Comes from other company                         X                   X

*1 Select the relevant 'Relationship with the Company'

a      Comes from parent company

b      Comes from other affiliate company

c      Major shareholder of the company

d      Concurrently holds office as outside director or outside corporate
auditor of another company

e      Holds office as management director or executive officer, etc. of another
company

f       Spouse, relatives within third degree of consanguinity or an equivalent
person of management level such as management director or executive officer,
etc. of the company or specific affiliates of the company

g      Receives remuneration, etc. or other profits on assets from the parent
company of the company or a subsidiary of such parent company as an officer

h      Limitation of Liability Agreement is executed between the said person and
the company

i       Other


    Relationship with the Company (2)


Name                              Supplementary Information         Reason for election as Outside Corporate
                                                                    Auditors
Yasutaka Okamura                  -                                 In order to receive advice based on his
                                                                    broad experiences and insight in his
                                                                    field of expertise
Yoichi Kaya                       -                                 In order to receive advice based on his
                                                                    broad experiences and insight in his
                                                                    field of expertise
Yoichi Morishita                  -                                 In order to receive advice based on his
                                                                    broad experiences and insight in his
                                                                    field of expertise
Akishige Okada                    -                                 In order to receive advice based on his
                                                                    broad experiences and insight in his
                                                                    field of expertise




    Matters relating to other major activities of Outside Corporate Auditors



       Outside Corporate Auditors attend meetings of the Board of Directors, the
Board of Corporate Auditors and other office meetings and give Directors advice
and exchange their opinions with other Corporate Auditors from their broad point
of view within the scope of their respective specialized field.





(Incentives)
Implementation of measures on incentive allotment to   Adoption of stock option plans
Directors:


    Supplementary Information



        We believe that this will heighten their willingness and motivation to
improve business performance in the medium- and long-term, enhance international
competitiveness and profitability, and contribute to increased corporate value.


Grantees of stock options:                            Inside Directors and others


    Supplementary Information



       Managing officers and senior managers are also included in the Grantees.



(Directors' Remuneration)
Means of Disclosure:                                  Annual securities report, business report
Disclosure Status:                                    The sum of all Directors' remuneration is disclosed.


    Supplementary Information



       Annual securities reports and business reports are made available for
public inspection on Toyota's Internet website also.



(Support System for Outside Directors (Outside Corporate Auditors))

       Full-time Corporate Auditors and Directors disclose adequate information
to Outside Corporate Auditors, such as by giving prior explanations on agenda to
be proposed to the Board of Directors.  An audit office is established with
full-time staff that assist Outside Corporate Auditors with audit activities.





2.     Matters pertaining to functions relating to the execution of duties,
audit and supervision, appointment and decisions regarding remuneration, etc.



       Toyota introduced the current management system in 2003.  Main
differences from the previous system are the establishment of the new position
of non-board 'Managing Officers' and the decrease in the number of Directors.
In the current system, 'Senior Managing Directors' serve as the highest
authorities and 'Managing Officers' perform practical business in Toyota's
various operational functions.  A distinctive feature of the system is that
'Senior Managing Directors' do not focus exclusively on management, but they
also serve as a link between the management and on-site operations, under the
view to maintain an emphasis on developments on the site, which is one of
Toyota's perennial strengths.  As a result, business decision directly connected
with actual operations can be made through incorporating feedback from frontline
operations to overall management strategy and reflecting management decisions
swiftly in operations.

       Toyota has an 'International Advisory Board' consisting of advisors from
overseas, and receives advice on a wide range of management issues from a global
perspective.  In addition, Toyota has a wide variety of conferences and
committees for deliberations and the monitoring of management and corporate
activities that reflect the views of various stakeholders, including the
'Labor-Management Council, the Joint Labor-Management Round Table Conference',
the 'Corporate Philanthropy Committee', the 'Toyota Environment Committee' and
the 'Stock Option Committee'.

       Toyota has adopted an auditor system.  Seven Corporate Auditors including
Outside Corporate Auditors play a role in Toyota's corporate governance efforts
by undertaking audits in accordance with the audit policies and plans determined
by the Board of Corporate Auditors.  For internal audit, a specialized
independent organization is working on establishing a solid system to evaluate
the effectiveness of internal controls over financial reporting.  In order to
enhance the reliability of the financial reporting of Toyota, the three auditing
functions, audit by Corporate Auditors, internal audit, and accounting audit by
Independent Accountants, aid in conducting an effective and efficient audit
through meetings held periodically and as necessary to share information through
discussion on audit plans and results.





III.     Implementation of measures for shareholders and other stakeholders



1.    Approach toward the vitalization of general meetings of shareholders and
the facilitation of exercise of voting rights


                                                           Supplementary Information
Scheduling of general meetings of Convenes the general meetings of shareholders avoiding the date on which
shareholders avoiding the date on general meetings of shareholders of companies are most and second most
which general meetings of         concentrated on.
shareholders of companies are
concentrated





2.     IR activities


                         Explanation by                         Supplementary Information
                         representative
                         members of the
                             board
Convene periodic        No               Convene briefings by officers and staff in charge of IR once or twice a
briefing for individual                  year (not regularly scheduled).
investors
Convene periodic        Yes              Explaining financial results and business strategies of the relevant
briefing for analysts                    business year every quarter.  Also convenes business briefings
and institutional                        concerning the medium- and long-term direction of the business.
investors
Convene periodic        Yes              Explaining financial results and business strategies of the relevant
briefing for foreign                     business year by visiting foreign investors and conference calls every
investors                                quarter.  In addition, business briefings concerning the medium- and
                                         long-term direction of the business are convened in the United States
                                         and Europe.
Disclosure of IR        Yes              In addition to legal disclosure documents such as annual securities
documents on the                         reports, annual reports and references at result briefings, etc. are
website                                  disclosed (such references of major briefings can be listened to on the
                                         website for a certain period).  On the exclusive site for individual
                                         investors, the operating summary and business activities are clearly
                                         disclosed.
IR related divisions    -                Toyota maintains IR personnel in the Accounting Division and Public
(personnel)                              Affairs Division, and offices resident IR personnel in New York and
                                         London.
Other                   -                Implementing one-on-one meeting with investors, plant tours, etc.





3.     Activities concerning respect for stakeholders


                                                      Supplementary Information
Setting forth provisions For sustainable development, Toyota has engaged in management emphasizing all of its
in the internal          stakeholders, and worked to maintain and develop favorable relationships with its
regulations concerning   stakeholders through open and fair communication.  This philosophy is outlined and
respect for the          disclosed in the 'Contribution towards Sustainable Development', an explanatory
stakeholders' position   paper on the 'Guiding Principles at Toyota', prepared in January 2005.
Promotion of             Toyota has long engaged in business with the idea of corporate social responsibility
environmental            ('CSR') in mind.  This idea is clarified in 'Contribution towards Sustainable
preservation activities  Development ' distributed in January, 2005, and it clearly conveyed Toyota's basic
and CSR activities       policies concerning CSR to both internal and external stakeholders.  Regarding the
                         environment, Toyota has positioned it as a top management priority and adopted the
                         'Toyota Earth Charter' in 1992.  Toyota created 'Toyota Environmental Action Plan'
                         that sets forth mid-term targets and action plans on a global basis, and promotes
                         continuous environmental preservation activities.  As for philanthropic activities,
                         Toyota newly adopted 'Basic Philosophy and Policy on Philanthropic Activities' in
                         2005 in light of the global expansion of its business and the increasing societal
                         expectations towards Toyota.  Toyota vigorously promotes philanthropic activities
                         according to local conditions in each country and region in order to contribute to
                         the development of a prosperous society and to promote its continuous development.
                         These CSR activities are disclosed in the report titled 'Sustainability Report'.
Establishment of policy  Toyota has engaged in timely and fair disclosure of corporate and financial
concerning disclosure of information as stated in 'Contribution towards Sustainable Development'.  In order
information to           to ensure the accurate, fair, and timely disclosure of information, Toyota has
stakeholders             established the Disclosure Committee chaired by an officer of the Accounting
                         Division.  The Committee holds regular meetings for the purpose of preparation,
                         reporting and assessment of its annual securities report, semi-annual securities
                         report under the Securities and Exchange Law of Japan and Form 20-F under the U.S.
                         Securities Exchange Act, and also holds extraordinary committee meetings from time
                         to time whenever necessary.





IV.    Basic Approach to Internal Control System and its Development



       Based on the 'Guiding Principles at Toyota' and the 'Toyota Code of
Conduct', we, together with our subsidiaries, have created and maintained a
sound corporate culture.  In our actual operations, based on the 'Toyota Way'
principles, we integrate into our business operation processes the principles of
problem identification ('Mondai Hakken') and continuous improvements ('Kaizen')
and make continuous efforts to train our employees who put these principles into
practice.

       With the above understanding, internal control has been developed under
the following basic policies.



(1)    Legal compliance by Directors

•    Ensure that Directors will act in compliance with, relevant laws and
regulations, and with the Articles of Incorporation, through measures such as
the Code of Ethics and an orientation program

•    Make decisions after comprehensive discussions at cross-sectional
decision-making bodies

•    Discuss significant matters and measures relating to issues such as
compliance and risk management at the Corporate Ethics Committee, etc.



(2)    Retention and management of information relating to the execution of
responsibilities by Directors

•    Retain and manage information appropriately in accordance with relevant
laws and regulations



(3)    Regulations and other systems related to the management of risks of
losses

•    Properly manage capital funds through the budgeting system and other forms
of control, and conduct our business operations and manage our budget based on
the authorities and responsibilities in accordance with the 'Ringi' system
(effective consensus-building and approval system), etc.

•    Prepare an accurate financial report, and make proper and timely disclosure
of information through the Disclosure Committee

•    Manage compliance regarding various risks related to safety, quality
control and other issues at the relevant division

•    Conduct emergency drills, and take other measures to diversify risks and
secure appropriate insurance, as a precaution for events such as natural
disasters



(4)    Efficiency of execution of responsibilities by Directors

•    Policies are managed for consistency based on medium to long term
management policies and on the Company's policies ('Hoshin')

•  Chief Officer will act as a liaison officer between the management and
operational functions, and delegate executive authority to Managing Officers
realize effective and timely decision making

•  Reflect advice from stakeholders, including external experts, in our
management



(5)    Legal compliance by employees

•    Distinguish the division of responsibilities of each organization unit and
maintain a foundation to ensure continuous improvements

•    Periodically review legal compliance and risk management, and report to the
Corporate Ethics Committee

•    Quickly obtain information and achieve immediate solutions utilizing
various hotlines in the Company



(6)    Appropriateness of the business operations of the group

•    Develop and maintain an environment of internal controls for the group by
sharing the guiding principles and the code of conduct

•    Manage our subsidiaries in a comprehensive manner through divisions of the
Company that manage the financing and management aspects and the business
activities of our subsidiaries, and ensure adequacy through information
exchanges between the relevant divisions and subsidiaries



(7)    Employees assisting the Corporate Auditors

•    Establish the Corporate Auditors Department and assign a number of
full-time staff to support this function



(8)    Independence of employees described in the preceding item (7)

•    Any changes in personnel in the Corporate Auditors Department require the
prior consent of the Board of Auditors, or of full-time Auditor



(9)    Report to Corporate Auditors

•    Report periodically and from time to time on matters concerning the
execution of significant operations, and immediately in the case where facts
that may cause significant damage to the Company are discovered



(10)  Ensure the efficient execution of audits by the Auditors

•  Ensure attendance of Corporate Auditors at major board meetings, inspection
of important Company documents, information exchange with independent auditors
and appointment of external experts with specialized knowledge



See the Diagram described in the attachment at the end.





V.     Others



1.    Matters regarding defense against a takeover bid

       No measures to defend against a takeover bid are scheduled to be adopted.



2.    Matters regarding other corporate governance systems, etc.



-








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