The foreign car showrooms that dot the American landscape generally are not bargain basements. A 1988 four-door Toyota Corolla DLX, for instance, one of the big Japanese company's most popular no-frills imports, bears a sticker price of $8,898 at one Washington-area dealership.

What few people realize is how much higher that price might have been.

Had Toyota passed through to customers the full effects of the dollar's 50 percent decline against the Japanese yen over the past 2 1/2 years, a Corolla's sticker price might today be $1,500 to $2,000 higher.

But Toyota did not take that route. With other Japanese manufacturers, it has responded to the challenge of endaka, a newly created word that means "high yen," with a remarkable campaign of sacrificing profits and raising productivity in its home factories in order to hold price increases to a minimum. The result is another success story for Japanese industry -- and another source of friction with the United States over trade.

It wasn't supposed to happen that way. Two-and-a-half years ago, the United States, Japan and three other industrialized countries joined hands to help push down the value of the dollar on the world's foreign exchange markets. It was a calculated attempt to boost the prices of foreign imports flooding U.S. markets in order to rein in the soaring U.S. trade deficit.

Since then, the dollar has indeed plummeted, hitting postwar lows against the yen and other major currencies late last year and then sticking there. But until recently, the anticipated price increases on Japanese cars have been slow in coming and the Reagan administration's hopes for a sharp reduction in the trade deficit have been confounded.

This is the story of how one Japanese company dealt with the dollar's historic fall, one of the greatest challenges to face the Japanese economy in the postwar era. To a degree, it is what all of Japan's export-oriented companies have done. Some have failed and some have succeeded, but together their efforts have helped slow the effect that the dollar's plunge was meant to have.

Japanese companies' strategy of the past 2 1/2 years also underlines what some analysts describe as a key difference between the corporate cultures of the United States and Japan. In planning the dollar's fall, U.S. officials had assumed that Japanese companies would respond as most American ones would, by raising prices quickly to preserve profits. (The falling dollar confronted Japanese exporters with the prospect of lower profits when their U.S. sales were translated back into yen.)

The Japanese, however, believe that the most important measure of a company's success is how much of a market it controls -- not profits -- and quickly got to work defending their sales levels here.

Production costs are among the corporate world's most closely held secrets and can vary widely from factory to factory. But the Wefa Group, a Philadelphia-based research firm, recently made estimates of what major Japanese auto makers like Toyota spend in building a typical compact car in their homeland.

In 1985, Wefa estimated, the raw materials in that typical compact car cost $2,131 (at the exchange rates prevailing then), with labor, administration, factory profits and Japanese taxes adding about $2,268. Another $521 went toward shipping the car across the Pacific, insuring it and paying the U.S. import duty. Later, the distributor in the United States took $787 in costs and profits for its handling of the car. The dealer added $913 in costs and ordinary profits. The car went on the lot with a sticker price of $6,620 -- the sum of all these costs.

The American who finally drove it away, however, probably paid more than the sticker price -- $750 more was common, meaning the retail price for the car really was $7,370. Such an "additional dealer markup" was routine in 1985 and added to the dealer's normal profit. The dealers were able to take advantage of a heavy demand for the Japanese imports caused by their popularity and a limit on Japanese auto imports arranged by the Reagan administration.

The United States was practically a money machine in those days for all Japanese auto makers and their U.S. partners. With little effort and creativity in marketing, they could sell every car they could ship, at unusually large profits. "Very few people in the U.S. grasped quite how much money these people were making," said James Womack, research director of the international motor vehicle program at Massachusetts Institute of Technology.

Today, things have changed dramatically. The dollar is trading at less than 130 yen, after having come near 120 during its latest plunge in December. That means that, compared with 1985, every dollar brought home from a foreign sale translates into about half the number of yen, which is what Toyota's balance sheet is based on. As a result, export-oriented companies in Japan have faced a do-or-die challenge to become competitive with the new exchange rates.

According to Toyota and an outside expert, the company's revenue fell by about 270 billion yen (just over $2 billion at current exchange rates) in the year ending June 30, 1987, because of the dollar's decline. But the company maintained that it managed to absorb these enormous losses by aggressively restructuring its production and marketing operations and continues to export at a profit.

Toyota said that it recouped close to 160 billion yen during the year by cutting costs. Steps taken ranged from reducing the number of manufacturing stations on assembly lines to condensing the company's annual report, with the latter saving about $23,000 at current exchange rates. Workers agreed to receive only modest annual wage increases.

In some factories, Toyota declared Thursday and Friday to be the "weekend," so that work could continue on Saturday and Sunday when the cost of electricity was lower. And for some of its sea transport, Toyota switched to American shippers, whose prices were lower than those of Japanese companies.

Like many Japanese producers, Toyota gets a majority of its components from a close-knit family of subcontractors. Often they are small firms that work for no one else and see their own prosperity as tied inseparably to that of Toyota. According to the car maker, they agreed to a plan to reduce what they charged Toyota, resulting in about half of the 160 billion yen of cost-cutting savings. "It was successfully organized so that the pie of suffering was divided among each layer," said Takashi Kamiya, an auto industry analyst at Daiwa Securities Research Institute in Tokyo. "No one company or layer suffered all the demerits of endaka."

Toyota also has found that the lower dollar versus a stronger yen means cheaper prices for the raw materials, steel and energy the company buys abroad. Because Japan has virtually no natural resources of its own, most everything that goes into a car made there has to be imported -- and imports are cheaper because of the currency changes. One analyst estimates that about 20 billion to 30 billion yen of Toyota's total savings originated this way.

In the long term, Toyota is saving money by opening plants in the United States, where the dollar's low value is pushing production costs down relative to Japan. It already has a joint venture plant with General Motors Corp. in Fremont, Calif. This spring, Toyota is to start up the assembly line at its first wholly owned U.S. factory, in Georgetown, Ky., and plans to make 30,000 of its high-demand Camry midsized cars this year. Some foreign companies, like Honda Motor Co. and Mazda Motor Corp., are finding production in this country so cheap in world terms that they have announced exports from their U.S. plants.

During the year ending June 30, another 60 billion yen or so was recouped by more aggressive marketing, Toyota said, most of it in Japan. Auto sales are booming there, as the Japanese go on a domestic spending spree. The higher sales volume and lower production costs that the new realities abroad have forced on Toyota are making the domestic market quite profitable. That reverses a years-old pattern in which Japanese auto makers have priced the Japanese market near break-even levels and relied for their profits on sales abroad.

Toyota's efforts mean that the car that rolls out of a plant in Japan these days has been made at a significantly lower price -- in yen -- than was the case in 1985. Wefa estimates that the typical compact of the big Japanese auto makers now contains only about $1,560 worth of raw materials, down from $2,131 (based on current dollar-yen exchange rates).

Changes on the factory floor have helped hold production and administrative costs, factory profit and Japanese taxes to $3,955. Altogether, Wefa estimates, Japanese companies have cut the yen cost of building a car by 31 percent.

Some auto analysts believe that cost-cutting has been so successful that profits enjoyed by Toyota Motor Corp.'s operations in Japan have dropped only marginally, if at all. "They've managed to weather the changes very well indeed," said John McNeil, director of automotive services at Data Resources, a Massachusetts market research firm.

But many analysts said that Toyota, like most Japanese export-oriented companies, has been unable to cover everything through improved productivity and has taken a major hit on profits at the factory level in its export business. Distributors and dealers in this country have done so too, by most analysts' accounts. The so-called additional dealer markups have disappeared in many parts of the country, so consumers pay no more than sticker price and may get a discount below it. (Many dealers still are able to charge such markups in the Washington area, however, because of the strong appeal of imported cars.)

Thus, Wefa's hypothetical car today costs $653 to ship, insure and get through customs. The distributor is taking $987. The dealer, having not only given up the additional markup, is in fact giving a $250 discount below the sticker price and now takes $695. The buyer pays $7,850 and takes the car home.

Toyota has spent 31 years building its market share in the United States and is not about to give it up, analysts say. The company has priced accordingly, its officials said.

"The biggest difference between U.S. and Japanese companies is that Japanese calculations usually start from the retail price -- what can we charge and still remain competitive?" said Masao Minoura, a Toyota spokesman in Tokyo. "The American case is the opposite. ... They think about profits first."

Japanese producers in this country have historically paid little attention to exchange rates in pricing their cars. Minoura looked back over Toyota's experience with its popular Corolla model since 1979. "During that time, even as the yen fell, the price of a Corolla was almost doubling," he said. "Why? Again, the first consideration was competitiveness. ... If we are confident we can increase sales even with a price increase, we will increase the price. That is natural, even though it may be against the consumer's interest."

Today, the price issue has become an important point of tension between Washington and Tokyo. During a trip to Japan last fall, U.S. Commerce Secretary C. William Verity Jr. warned that his department was investigating whether Japanese companies had sacrificed profits to the point that they were "dumping" in the United States, illegally selling goods below the cost of production.

When Japan's new prime minister, Noboru Takeshita, visited Washington in December, the issue came up again, with Sen. John Danforth (R-Mo.) making an outright accusation of dumping against Japanese auto companies.

The Commerce Department has ruled, after lengthy investigations, that dumping is taking place in a variety of Japan's smaller product lines.

The department issued such findings in late 1987 for certain types of bearings, television picture tubes and forklift trucks. So far in 1988, it has ruled that dumping was occuring on certain types of metal cylinders.

Verity sounded the antidumping theme during a visit to Japan in November. "By failing to price in line with the appreciated yen," he told the American Chamber of Commerce in Tokyo, "... Japanese firms are impeding the power of currency adjustments to correct our trade imbalance." Verity added that his department was examining possible dumping of a "variety of products" by Japan.

Last April, Danforth and 57 other senators and representatives sent a letter to then Commerce Secretary Malcolm Baldrige complaining that Toyota seemed to be dumping pickup trucks in this country. The letter traced the cost of a vehicle back to Japan, deducting from the retail price costs incurred in the United States, such as profit and freight, and arriving at the figure $3,021.

"Our sources tell us that it is doubtful that a Japanese manufacturer can build a pickup for $3,121," the letter said.

Yet, no formal complaint on dumping was ever filed.

The Big Three auto makers of Detroit now have their sleuths working on passenger cars, trying to figure out their Japanese competitors' costs and determine whether there is room for antidumping legal action.

By some accounts, Toyota is the focus of their scrutiny, as it is commonly assumed to be the most efficient of the Japanese makers.

If it is dumping, the reasoning goes, then so must be everyone else.

Wefa's analysts haven't found proof of dumping on imported automobiles, however.

"We don't think the Japanese are dumping," said Wefa's Ted Sullivan. ... They're making much less profit than they did before but nonetheless there should be some profit in there."