UPDATE 4-Toyota mulling fix for possible engine defect

* Toyota says up to 270,000 units subject to review

* Says engine may stall but no reports of accidents

* Lexus recall would be second since Friday

* Toyota shares end down 2.3 pct, outperforming sector

(Adds analyst comment, share price)

TOKYO, July 1 (Reuters) - Toyota Motor Corp (7203.T) said on Thursday it is considering taking steps to eliminate possible engine failure in as many as 270,000 cars, as the world's largest automaker continues to ramp up its safety oversight following a string of recalls.

The company is considering "some kind of measure", which could be a recall depending on a decision from regulators, on some of its eight high-end models, including Lexus and Crown sedans, with 4.6 litre and 3.6 litre engines, a Toyota spokeswoman said.

Some of these vehicles could have a problem with the valve spring in their engines which may cause idling trouble that could lead to engine failure, though no accidents have been reported, she continued.

Investors would shrug off the news as the cost of any recall is expected to be limited and as recalls are not generaly viewed negatively as long as they are carried out swiftly after problems emerge, said Yoshihiko Tabei, an analyst at Kazaka Securities in Tokyo.

"It's not as if there has been an accident caused by the possible defect. Investors are not worried as long as carmakers act quickly to address quality problems," he said, adding that focus in the auto sector is currently on labour disputes at parts suppliers in China. [ID:nSGE65103V]

Toyota shares shed 2.3 percent to 3,010 yen, outperforming the Topix subindex for the auto sector .ITEQP.T which lost 2.6 percent.

RELIABILITY JOLTED

Toyota has recalled more than 10 million vehicles worldwide since last September, most for the potential of unintended acceleration, jolting the firm known for its reliability.

Just last Friday, Lexus told U.S. safety regulators it was halting sales and recalling about 17,000 Lexus HS250h gasoline-electric hybrid sedans due to a potential fuel leak.

Toyota acted following a U.S. government crash test that showed fuel leaking after an HS250h was struck from the rear by a car travelling about 50 miles per hour (80 kilometres per hour).

About 13,000 model year 2010 HS250h vehicles were sold in the United States, and about 17,000 have been built to sell in the U.S. market, Toyota told its U.S. Lexus dealers in a letter last Friday.

Toyota's own crash test did not show the fuel leak problem. The automaker, in the letter to U.S. Lexus dealers, said it was trying to understand why the government tests showed the fuel leakage problem while the company's own crash tests did not.

The automaker told dealers it has not received any reports of injuries or accidents linked to the potential problem with the HS250h sedan. The Nikkei business daily reported that Toyota said there were no reported accidents related to the 460LS issue, either.

Toyota is investigating the cause and would likely need to replace engine-related parts or upgrade control software, the daily said. (Reporting by Koustav Samanta in Bangalore, Bernie Woodall in Detroit and Yumiko Nishitani in Tokyo; Editing by Don Sebastian and Joseph Radford) (bernie.woodall@thomsonreuters.com; +1 313-967-1901))