Toyota Forecasts 21% Profit Decline as Tariffs and Strong Yen Impact Outlook

Toyota Motor, the world’s top-selling carmaker, has forecasted a 21% drop in profit for the current financial year, citing pressure from US tariffs and a stronger Japanese yen despite continued strong demand for hybrid vehicles. The company projects an operating income of 3.8 trillion yen ($26 billion) for the year ending March 2026, compared to 4.8 trillion yen in the previous year. The forecast aligns with analysts' expectations, who had estimated around 4.75 trillion yen, according to LSEG data. Toyota warned of potential economic fallout from tariffs introduced by former US President Donald Trump, particularly in the form of decreased consumer sentiment both in the US and globally. Higher prices from tariffs can lead to reduced consumer spending, which may weigh on overall demand. The company also pointed to increased material costs and the appreciating yen as key factors expected to negatively impact profits. A stronger yen typically reduces the value of overseas earnings when converted back to Japanese currency. Toyota, like other international automakers, may also face rising labor costs in the US and pressure to increase investment should it choose to expand its American manufacturing operations further. In China, while Toyota’s sales performance has been slightly better than that of other Japanese competitors, the automaker continues to struggle amid fierce competition from domestic Chinese brands in the world’s largest auto market.