Tokyo, 09 May 2008: Japanese carmaker Toyota has posted a 28% fall in profit for the first three months of 2008, and predicted its first annual profit fall in seven years. It blamed falling demand in the US, and a stronger yen, which makes Japanese exports more expensive.

Net income dropped to 316.8bn yen ($3bn) in the quarter to March, down from 440bn yen a year ago.

Toyota is aiming to be the world's biggest car firm, beating US rival General Motors (GM).

Toyota's profits have boomed over recent years, driven by the success of its smaller fuel-efficient cars, including the Yaris and the hybrid Prius, and growing demand in emerging markets, including Russia, China and Middle East. This helped it to sell more cars than GM between January and March this year.

But the surging costs of steel, aluminium and copper, in addition to the yen's steep rise against the US currency, is now expected to prevent Toyota from reaping the benefits of its continued expansion in new markets. And pressures on US consumers, who are seeing higher petrol and other household bills, are also taking their toll.

However, analysts still expect Toyota to fare better than General Motors and Ford as US consumers look for more fuel-efficient cars.