Toyota raises annual profit forecast

Toyota dealership A recovery in its US sales over the past few months has been key to Toyota's profit growth

Toyota has raised its forecast for annual profit as a weak yen and a recovery in sales in the US continue to boost its growth.

It now expects to make a net profit of 1.48tn yen ($14.8bn; £9.8bn) for the current financial year, up from its earlier projection of 1.37tn yen.

The carmaker raised the outlook as it said earnings for the April to June quarter had jumped 93% from a year ago.

Many Japanese firms have seen a surge in profits thanks to the weakening yen.

The yen has fallen by nearly 25% against the US dollar since November, after the government unveiled a series of aggressive policy moves.

Analysis

The stellar results being reported by Toyota and other big Japanese companies this week are a direct result of the economic policies of Prime Minister Shinzo Abe.

Part one of "Abenomics" has been a huge government bond-buying program initiated by the Bank of Japan in the spring. The effect has been to push down the value of the Japanese yen by more than 20%.

For big exporters like Toyota that has meant a windfall of extra revenue.

For example, a Toyota Camry sold in the United States costs around $30,000. Six months ago that was equivalent to 2.4 million yen.

Today the same car, at the same price, will bring in 3 million yen. And that goes both for Toyotas exported from Japan and for Toyotas made in America.

That means Toyota is now in the enviable position of keeping prices steady and making a bigger profit margin, or dropping prices and increasing its market share.

Little wonder the US auto makers are upset.

A weak currency not only makes Japanese goods more affordable to foreign buyers but also helps to boost profits of exporters when they repatriate their foreign earnings back home.

'Profit improvement'

On Friday, Toyota reported a net profit of 562bn yen in the three months to the end of June, up from 290bn yen during the same period last year.

The company said that cost cutting measures had also helped to lift its earnings during the quarter.

"Operating income increased due to the impact of foreign exchange rates and our global efforts for profit improvement, through cost reduction activities such as companywide value analysis," Takuo Sasaki, chief marketing officer for Toyota, said in a statement.

He added that the "enhancement of the model mix and pricing" had also helped to boost profits.

Toyota also set a worldwide production target of 10.1 million vehicles for the 2013 calendar year, which would be a record across the industry.

Race to the top

It kept its sales goal for the year at 9.96 million vehicles, making it a close race with US rival General Motors for the title of world's top carmaker.

Toyota said it sold 1.3 million vehicles in the US, its biggest market, in the January to July period, up 8% from a year ago.

The US accounts for nearly a quarter of Toyota's global sales.

However, Toyota saw slower-than-expected growth in Southeast Asia, its third biggest market after North America and Japan.

Toyota sold about 539,000 vehicles in the region in the January-June period which was the same as last year, but 15% below the industry-wide growth.

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