By Maki Shiraki and Makiko Yamazaki

TOKYO (Reuters) -Toyota Motor ( TM ) said it is exploring the possibility of investing in a potential buyout of key parts supplier Toyota Industries ( TYIDF ) - a buyout that reportedly could cost $42 billion.

"We are currently exploring various possibilities, including partial investment," the automaker said in a filing with the Tokyo stock exchange on Saturday following reports about the possible buyout.

Bloomberg News reported on Friday that Toyota ( TM ) Chairman Akio Toyoda and his founder family have proposed acquiring Toyota Industries ( TYIDF ) in a possible 6 trillion yen ($42 billion) deal.

Toyota Industries ( TYIDF ), which has a market value of 4 trillion yen, said in a statement it had received proposals about going private through a special purpose company but denied it had received a buyout proposal from the Toyota ( TM ) chairman or the Toyota ( TM ) group.

Two sources familiar with the matter said Toyota Industries ( TYIDF ) is considering tapping Toyota ( TM ) and its group companies as well as major banks to fund a buyout. They also said the proposal did not come from Akio Toyoda or the Toyota ( TM ) group.

The sources, who declined to be identified as the matter is not public, said if Toyota Industries ( TYIDF ) were to go private, it would help improve the Toyota ( TM ) group's corporate governance as cross-shareholdings would be unwound.

Both Toyota ( TM ) and Toyota Industries ( TYIDF ) said in their statements that nothing has been decided.

Toyota ( TM ) owned 24% of Toyota Industries ( TYIDF ) as of September last year, while Toyota Industries ( TYIDF ) held 9.07% of Toyota ( TM ) and 5.41% of Denso ( DNZOF ), another key Toyota ( TM ) supplier.

Toyota Industries ( TYIDF ) has faced increasing shareholder pressure to unwind its cross shareholdings so that it can boost shareholder returns and make investments.

It has sold some of its cross shareholdings including stock in Aisin, another core Toyota ( TM ) group supplier.

One of the sources said going private would also give Toyota Industries ( TYIDF ) the freedom to focus on growth strategies without worrying about shareholder returns.

Cross-shareholdings, where companies hold shares in each other and are very common in Japan, have been under increasing scrutiny from regulators and shareholders as the practice can insulate management from having to serve the interests of general shareholders.

Toyota Industries ( TYIDF ), formerly Toyoda Automatic Loom Works, was founded in 1926 by Sakichi Toyoda to manufacture automatic looms. An automotive division within the company was created and later spun off as Toyota Motor ( TM ). Toyota Industries ( TYIDF ) is a major manufacturer of forklifts, produces the RAV4 sport utility vehicle for Toyota Motor ( TM ) as well as engines.

($1 = 143.6700 yen)