Nov. 5 (Bloomberg) -- Toyota Motor Corp., the world’s largest carmaker, narrowed its full-year net loss forecast for a second time after government stimulus measures revived vehicle demand in the U.S. and Asia.

The company expects a 200 billion yen ($2.2 billion) loss in the year ending March 31, compared with an earlier forecast for a 450 billion yen loss, it said in a statement today. The automaker posted an unexpected second-quarter profit of 21.8 billion yen.

Toyota joined Nissan Motor Co. in predicting a smaller loss as government tax cuts and subsidies spur global car demand. President Akio Toyoda, who said last month the maker of Corolla compact cars was one step from “irrelevance or death,” has ordered the carmaker’s first plant closure and an exit from Formula One racing to cut costs.

“Toyota’s sales are picking up more than initially thought,” said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments Ltd. in Tokyo, which manages 3.4 trillion yen. “Like Honda and Nissan, Toyota is benefiting from government stimulus programs.”

The Toyota City, Japan-based company raised its full-year revenue forecast to 18 trillion yen from 16.8 trillion yen as it boosted vehicle sales estimates for Asia, Japan and North America.

Global Sales

The improved earnings outlook follows Honda Motor Co. almost tripling its profit estimate last week. Nissan narrowed its loss forecast, citing better-than-expected sales in China. Hyundai Motor Co., South Korea’s biggest automaker, posted a record profit in the quarter on surging U.S. and China sales and a weaker won.

Toyota’s second-quarter net income compared with a projected loss of 23.2 billion yen, based on the median of five analyst estimates compiled by Bloomberg. The profit was due to strong performance by the company’s finance division, Toyota said today.

Net income in the three months still fell from 139.8 billion yen a year earlier as vehicle sales declined in Asia, Europe and the U.S. and a stronger yen cut the value of overseas earnings. The yen averaged 13 percent stronger against the dollar last quarter than a year earlier.

“The U.S. economy is still in bad shape, with the job situation worsening,” said Yuuki Sakurai, chief executive officer of Fukoku Capital Management Inc. in Tokyo, which manages about 800 billion yen. “The dollar will likely remain weak.”

U.S. Unemployment Rises

A U.S. Labor Department report tomorrow will probably show that the jobless rate rose to 9.9 percent in October, a 26-year high, while payrolls fell by 175,000 workers, according to the median forecast of economists surveyed by Bloomberg.

Toyota fell 0.8 percent to close at 3,580 yen in Tokyo trading before the earnings announcement. The shares have gained 23 percent this year.

For the full year, Toyota raised its global vehicle sales forecast to 7.03 million from an August forecast of 6.6 million. The company sold 7.57 million units last fiscal year. Toyota narrowed its full-year operating loss forecast to 350 billion yen from 750 billion yen.

“Demand-stimulating measures by governments worldwide have contributed to our revised targets for the full fiscal year,” Executive Vice President Yoichiro Ichimaru told reporters in Tokyo. “We continued to make improvements in the reduction of fixed costs.”

Cost Cuts

The withdrawal from Formula One from next season, announced yesterday, may save Toyota 50 billion yen a year, according to Koji Endo, managing director of Advanced Research Japan, a Tokyo-based equity research company.

The carmaker said in August it would shut its New United Motor Manufacturing Inc. assembly plant in Fremont, California, the first factory closure in Toyota’s 72-year history. A collapse in U.S. auto sales to the lowest level since 1976 left Toyota struggling to keep North American plants running at capacity.

Sales in the U.S., traditionally Toyota’s biggest market, fell 28 percent in the first nine months of 2009, even after the government’s “cash for clunkers” rebate program boosted August’s tally by 6.4 percent. September sales dropped 13 percent after the program ended.

Toyota may increase sales in Japan for the first time in five years as the government offers rebates of as much as 250,000 yen to buyers of fuel-efficient vehicles. The company’s third-generation Prius gasoline-electric hybrid was the country’s best-selling passenger car model for five straight months through September.

President Toyoda plans to introduce four new gasoline- electric hybrid models in Japan and three overseas by the end of March.

To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net

Last Updated: November 5, 2009 02:48 EST