San Francisco Frontiers - Weak yen helps auto giant Toyota raise forecasts

The world's number one automaker by sales delivered the brighter outlook days after Tokyo and Washington moved to boost the beleaguered currency.

The new forecast reflects "changes in the external environment such as foreign exchange assumptions, as well as marketing efforts including the establishment of alternative logistics routes to the Middle East", it said.

Automakers have hit the skids because of the Middle East conflict pushing up raw materials costs and snarling up shipping routes, as well as US import tariffs and Chinese rivals gaining market share.

Last month, Chinese electric vehicle giant BYD challenged Toyota, Nissan and Suzuki in their front yard, launching a pint-sized "kei" car in Japan.

For the current year to March 31, 2027, Toyota expects net income of 3.25 trillion yen ($20.6 billion), up from its previous projection in May of 3.0 trillion yen, but still down from last year's 3.8 trillion yen.

It predicted operating income of 3.4 trillion yen, up from the last forecast of 3.0 trillion yen, and revenues of 54.0 trillion yen, a rise of 6.5 percent from the previous year.

First-quarter net income soared 75.6 percent to 1.5 trillion yen, beating market expectations.

Operating income fell 8.8 percent -- the fifth straight quarterly drop -- to 1.1 trillion yen and revenues rose 10.4 percent to 13.5 trillion yen, Toyota said.

It credited currency effects, cost reductions and higher sales of hybrid electric vehicles, helping to compensate for the "impact of the Middle East situation".

However, total vehicle unit sales fell 2.8 percent year-on-year in the first half of calendar 2026, weighed down notably by a 17.1-percent plunge in China.

Toyota also announced a one-trillion yen share buyback programme. Its share price dipped, however, losing almost two percent on Tuesday.

"As it was impossible to pass through the Strait of Hormuz, we had to take a detour round the Cape of Good Hope in South Africa to deliver goods to the Middle East, which meant that logistics lead times had doubled," Toyota executive Takanori Azuma said.

"However, we are currently developing various logistics routes, such as transferring the vehicles just before the Strait of Hormuz, without passing through it, and having them transported overland into the Middle East," he said.

- Yen and yang -

Japan and the United States intervened jointly in financial markets last week, buying yen for the first time since the Asian financial crisis in 1998.

The joint operation came after the yen hit 163.99 per dollar last month, its weakest since 1986.

On Friday it soared to 157.40 and on Tuesday was trading around the same level after a jump on Monday that some traders thought was due to another intervention.

The yen had weakened because of the gap between Japanese and US interest rates, high oil prices and concerns about Prime Minister Sanae Takaichi's spending plans further swelling Japan's enormous debts.

This inflated import costs for resource-poor Japan, especially for oil at a time when the war has strangled supplies from the Gulf.

But a weaker currency also meant that money earned abroad converted into more yen, while also helping Japanese exporters price their products more competitively.

Consumer electronics giant Sony last week also hiked its annual profit forecast, helped by strong sales in its video games division -- and the feeble yen.

Part of US President Donald Trump's rationale for the intervention to boost the yen was to help American companies -- such as Toyota's rivals -- and lower the US trade deficit, analysts said.

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J.Peterson--SFF