Toyota raises annual profit forecast as weak yen offsets global challenges

Japanese automaker Toyota Motor Corporation has raised its financial outlook for the current fiscal year, saying the weaker yen has helped cushion the impact of rising costs linked to the Middle East conflict, global supply chain disruptions and intense competition in the Chinese market.

The world’s largest automaker by vehicle sales announced on Tuesday that it now expects a net profit of 3.25 trillion yen (about $20.6 billion) for the financial year ending March 31, 2027, up from its previous forecast of 3.0 trillion yen issued in May. However, the revised projection remains below the 3.8 trillion yen recorded in the previous fiscal year.

Toyota also increased its operating profit forecast to 3.4 trillion yen, from an earlier estimate of 3.0 trillion yen, while projecting annual revenue of 54 trillion yen, representing a 6.5 per cent increase over the previous year.

Strong first-quarter earnings

The company reported first-quarter net income of 1.5 trillion yen, a 75.6 per cent increase compared with the same period last year and above analysts’ expectations.

However, operating profit declined by 8.8 per cent to 1.1 trillion yen, marking the fifth consecutive quarter of lower operating earnings. Revenue for the quarter rose 10.4 per cent to 13.5 trillion yen.

Toyota attributed its improved earnings outlook to favourable exchange rates, cost-cutting measures and strong sales of hybrid electric vehicles, which helped offset the impact of disruptions caused by the conflict in the Middle East.

Logistics challenges and China slowdown

The automaker said the conflict in the Middle East has significantly affected its logistics operations, particularly because commercial shipping has been disrupted in the Strait of Hormuz.

Toyota executive Takanori Azuma said the company had been forced to reroute shipments around the Cape of Good Hope in South Africa, doubling delivery times to Middle Eastern markets.

To reduce delays, Toyota is developing alternative logistics arrangements, including transporting vehicles to locations near the Strait of Hormuz before moving them overland into Middle Eastern countries.

Despite the improved financial outlook, Toyota reported that global vehicle sales declined by 2.8 per cent during the first half of 2026, largely due to a 17.1 per cent drop in sales in China, where competition from domestic electric vehicle manufacturers has intensified.

Share buyback and currency effects

Toyota also announced a one-trillion-yen share buyback programme, although its shares fell nearly two per cent after the announcement.

The company’s improved outlook comes shortly after coordinated intervention by the Japanese and U.S. governments to strengthen the yen following its sharp depreciation against the U.S. dollar.

While a weaker yen has increased import costs for energy and raw materials, it has also benefited Japanese exporters by making overseas earnings more valuable when converted into yen and improving the global competitiveness of their products.

Toyota said it will continue to monitor geopolitical developments, currency movements and global market conditions as it works to maintain profitability despite ongoing economic uncertainties.