Toyota, vying with General Motors for the title of the world's top automaker, now expects earnings of 550 billion yen (S$8.31 billion) in the current year to March, down from the 1.25 trillion yen previously projected.

That would mark a decline of 68 percent from the previous year - the first drop in Toyota's annual earnings in nine years.

'The financial crisis is negatively impacting the real economy worldwide, and the automotive markets, especially in developed countries, are contracting rapidly,' Toyota executive vice president Mitsuo Kinoshita said.

'This is an unprecedented situation. However, we are already taking measures,' he said in a statement.

Toyota said its first-half earnings tumbled 48 per cent to 493.47 billion yen due to a stronger yen and weak global economy.

Operating earnings fell 54.2 per cent to 582.07 billion yen as revenue declined 6.3 per cent to 12.19 trillion yen.

'Negative results are largely due to the appreciation of the yen and the decline in vehicle sales under difficult market conditions in the US and Europe,' Kinoshita said.

Toyota sold 4.25 million vehicles globally in the first half, 51,000 fewer than a year earlier.

The global slowdown has badly shaken Japan's automakers, which in recent years have cashed in on worldwide demand for their smaller and more fuel-efficient cars.

In North America, the epicentre of the global credit crunch, Toyota made a first-half operating loss of 34.6 billion yen, excluding the positive effect of valuation gains on interest rate swaps. Profits in Europe plunged. -- AFP