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Strong yen prompts Toyota profit warning

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Strong yen prompts Toyota profit warning

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Toyota is warning its annual profit for 2016/17 will be the smallest in four years – down 44 percent from the previous financial year.

The carmaker blamed the stronger yen as well as slowing demand for some of its models in the key North American market.

For the April-June quarter an appreciating yen pushed net profit down 14.5 percent.

When the yen strengthens against other currencies Japanese manufacturers suffer because the cars they export from their home country become more expensive.

The value of earnings made overseas is also reduced.

Toyota is particularly vulnerable as it produces around 40 percent of its vehicles in Japan, much more than its domestic competitors.

A weak yen in the previous three years had led to a period of record annual profits at Toyota.

Toyota’s global vehicle sales rose during the first quarter on higher sales in Japan, Europe and Asia.

But sales fell in North America, where US demand for the Prius has been sluggish, as lower fuel prices have increased demand for gas-guzzling SUVs and pick-up trucks.

Toyota said it planned to produce an additional 30,000 SUVs and larger vehicles, including its popular RAV4 crossover model, in the United States, in the fiscal year to take advantage of the shift in consumer preference that has hurt demand for models like the Prius and the Camry sedan.

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