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Japanese carmaker Toyota has raised its forecast for annual profit as a weak yen and a recovery in sales in the US continue to boost its growth.

Toyota now expects to make a net profit of 1.48 trillion yen ($14.8bn) for the current financial year, up from its earlier projection of 1.37 trillion yen.

The carmaker raised the outlook as it said earnings for the April to June quarter had jumped 93% from a year ago.

Many Japanese firms have seen a surge in profits thanks to the weakening yen.

The yen has fallen by nearly 25% against the US dollar since November, after the government unveiled a series of aggressive policy moves.

A weak currency not only makes Japanese goods more affordable to foreign buyers but also helps to boost profits of exporters when they repatriate their foreign earnings back home.

On Friday, Toyota reported a net profit of 562 billion yen in the three months to the end of June, up from 290 billion yen during the same period last year.

Toyota has raised its forecast for annual profit as a weak yen and a recovery in sales in the US continue to boost its growth

Toyota has raised its forecast for annual profit as a weak yen and a recovery in sales in the US continue to boost its growth

The company said that cost cutting measures had also helped to lift its earnings during the quarter.

“Operating income increased due to the impact of foreign exchange rates and our global efforts for profit improvement, through cost reduction activities such as companywide value analysis,” Takuo Sasaki, chief marketing officer for Toyota, said in a statement.

Takuo Sasaki added that the “enhancement of the model mix and pricing” had also helped to boost profits.

Toyota also set a worldwide production target of 10.1 million vehicles for the 2013 calendar year, which would be a record across the industry.

It kept its sales goal for the year at 9.96 million vehicles, making it a close race with US rival General Motors for the title of world’s top carmaker.

Toyota said it sold 1.3 million vehicles in the US, its biggest market, in the January to July period, up 8% from a year ago.

The US accounts for nearly a quarter of Toyota’s global sales.

However, Toyota saw slower-than-expected growth in Southeast Asia, its third biggest market after North America and Japan.

Toyota sold about 539,000 vehicles in the region in the January-June period which was the same as last year, but 15% below the industry-wide growth.

Japan’s economy contracted in the third quarter of 2012, as a global economic slowdown and anti-Japan protests in China hurt its exports, while domestic consumption remained subdued.

Japan’s gross domestic product (GDP) contracted 3.5% from a year earlier.

Compared with the previous three months, the economy contracted 0.9%.

The weak data is likely to put pressure on the government to boost stimulus measures to spur growth.

“There are risks from both domestic and external factors,” said Tatsushi Shikano, senior economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo.

“As such, the Bank of Japan [BOJ] will stand ready to ease monetary policy again, and it would not surprise me if the BOJ eased again by the end of this year.”

Japan’s economy, the world’s third-largest, has been trying to recover from last year’s earthquake and tsunami, which caused widespread destruction in the country.

However, its recovery has been hampered by a combination of factors.

A slowdown in key markets, such as the US and eurozone has hurt demand for its exports, one of the biggest drivers of Japanese growth.

Slowing growth and anti-Japan protests in China – Japan’s biggest trading partner – have further impacted its export sector.

To add to its woes, the debt crisis in the eurozone and weak recovery in the US have seen many investors flock to safe-haven assets such as the yen, resulting in the Japanese currency strengthening against the US dollar and the euro.

The yen has risen 5% against the US dollar since March this year and 8.5% against the euro during that period.

That makes Japanese goods more expensive for American and European consumers, hurting the earnings of the country’s exporters.

To make matters worse, attempts by policymakers to boost domestic demand have had little effect. Private consumption fell 0.5% in the July to September quarter, from the previous three months.

Analysts said that given these factors the economy was likely to shrink further in the current quarter and enter a technical recession.

“The decline in exports seems large. Consumption and capital expenditure were also weak, showing that both external and domestic demand are weak,” said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo.

“Economic data deteriorated sharply from September, and this means Japan is already in recession,” he added.

Faced with slowing external and domestic demand, Japan’s central bank has taken various steps to try and spur growth.

Earlier this month, the BOJ extended its asset purchase programme by 11 trillion yen ($138 billion). Under the programme, the central bank buys bonds to keep long-term borrowing costs down.

It also said that it will offer unlimited loans to banks to encourage lending in an effort to boost domestic consumption.

However, analysts said the measures were unlikely to have a major effect, not least because firms were holding back expansion plans in the wake of an uncertain economic environment.

“There is very little demand for credit. In fact Japanese firms are holding back on capital expenditure,” said Junko Nishioka, the chief economist of RBS Securities in Tokyo.

Junko Nishioka added that policymakers instead needed to focus on measures that will help weaken the yen, as the uncertain global economic environment was likely to see the Japanese currency, which is seen by some as a safe-haven asset in such times, remain strong.