(Adds details from report)
TOKYO, June 15 (Reuters) - Japan will give Toyota around 120 billion yen ($854 million) support towards the automaker's plan to invest in domestic production of the lithium ion batteries used in electric vehicles (EV), the Nikkei newspaper said.
Toyota this week laid out a sweeping plan for new technology and a radical redesign of factories, sending its clearest signal yet of its intention to capture a larger share of the fast-growing market for battery electrics, where it has been far outsold by rivals such as Tesla.
The government help would also come as Japan and other U.S. allies increasingly look to secure supply chains away from China, which is a major player in EV batteries.
Japan's trade ministry has designated storage batteries, including car batteries, as critical to economic security and has earmarked 330 billion yen in its second supplementary budget to support their supply and development, the Nikkei said.
The government intends to shoulder a third of capital expenditure and half of technological development. In Toyota's case the total amount of the project to be subsidised is seen reaching 330 billion yen, the newspaper said.
($1 = 140.4500 yen) (Reporting by David Dolan; Editing by Hugh Lawson)