Toyota Motor, the giant automaker plunging towards its first annual loss in 70 years, is to break perhaps the greatest Japanese industrial taboo and buy Korean steel for use in its domestic factories.

Brokers described the gambit, which plays heavily on the current strength of the yen versus the Korean won, as a “scene-shifting” moment for corporate Japan and the cosy lattice of domestic-only relationships that date back many decades.

Toyota’s move comes amid reports that the company is preparing to reveal details of its medium and long-term plans to revive the company’s fortunes after its worst year ever.

The change of steel supplier is expected to trigger panic throughout the vast food chain of parts manufacturers and component makers based in the Aichi region of central Japan. At a minimum, industry insiders told The Times, the move will spark a damaging price war among suppliers. At worst, it shatters an industrial myth that only Japanese steelmakers were capable of making product to the standards required by Toyota.

Times are tough, but Toyota always stood for the Made in Japan ethos even when companies like Nissan have bought steel from Korea, said the senior executive of one Nagoya-based plastics maker, “it is hard to imagine life without that security.”

Toyota’s striking break with tradition comes just days after the company appointed a scion of the founding Toyoda family as the next president. For 14 years, the most senior levels of Japan’s largest company have been free of Toyoda family members, but the appointment of Akio Toyoda, the founder’s grandson, reverses that, prompting stern warnings in the editorials of Japan’s financial media that Toyota not “retreat into the past”.

The move, which was revealed yesterday by sources at Korea’s largest steelmaker, Posco, also sends a shudder of fear throughout the non-auto related manufacturing heartlands of Japan: if a national champion like Toyota can no longer be relied upon to buy Japanese, runs the logic, then all bets are off.

The favourable exchange rate could mean that Japanese electronics makers turn to Korean suppliers for semi-conductors, LCD panels and a variety of other components. Even Japanese retailers are concerned by the cheapness of the won, with Tokyo department stores watching in horror as their best customers fill cheap weekend flights to Seoul and indulge in “strong yen shopping” binges.

Toyota’s decision to source steel from Korea, rather than from domestic giants like JFE and Nippon Steel, comes as the Japanese auto industry is attempting to navigate the worst markets it has ever experienced. Toyota itself, in addition to deep cuts in temporary worker numbers, has revealed plans for 11 days of plant suspensions at its Japanese factories in coming weeks.

Slumping domestic growth and the rapid collapse of sales in the US and Europe were widely anticipated – more alarming has been the retrenchment in what were supposedly the strongest emerging markets of Russia, China and India. Chinese growth rates are especially troubling to Japanese automakers. The world’s second-largest auto market is growing at only single-digit rates for the first time in a decade and analysts believe that a sustained recovery may be at least 18 months away.

Analysts in Seoul said that Toyota’s move was driven purely by cost concerns and was responding to the favourable currency conditions for buying Korean steel. The move, said KB Investment & Securities steel analyst Cho In Je, may also be a ruse by Toyota to force domestic Japanese suppliers to lower their prices. Toyota’s relationship with Posco is not entirely new – it already uses Korean steel at its factory in Thailand.

Korean products are benefitting from a 25 per cent collapse in the won against the US dollar last year.

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