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Toyota Warns It May Have To Move Production Out Of Japan.

Full-year earnings up, but exchange rate, recalls likely to yield 2nd-half plunge.

by on Nov.05, 2010

It's becoming increasingly difficult to keep building vehicles, like the Prius, in Japan, warns Toyota.

Toyota Motor Co. did markedly better during the first half of its fiscal year, a senior company official disclosed Friday, but while strong sales in key markets, such as Asia will help it deliver better earnings than expected for the current year, the rising value of the yen and its ongoing recall problems will result in a plunge in earnings during the second half of 2010.

Income for the full fiscal year, which ends March 31, 2011, is now expected to rise to 350 billion yen ($4.31 billion), up from an earlier forecast of 340 billion yen.

That projected improvement comes “despite the influence of the strong yen,” which has been a serious problem for the maker in dealing with its largest foreign market, the United States, said Toyota Managing Officer Takuo Sasaki, speaking through an interpreter, during a teleconference to discuss the company’s latest quarterly earnings.

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Looking ahead, Toyota now anticipates an exchange rate of 85 yen to the dollar, down from an earlier forecast of 90.  But on November 1, the exchange rate fell to its lowest level in more than 15 years, the yen plunging to 80.22 against the dollar.

“If we assume the (exchange rate) remains at 80 yen to the dollar, the environment will be extremely tough,” cautioned Sasaki, and would raise questions about how long the company can continue producing vehicles in Japan.