90% drop for Honda

Honda Motor Co., the first major Japanese automaker to report quarterly earnings, slashed its full-year forecast Friday after reporting a 90 percent drop in profit for the three months to Dec. 31, the third quarter of Japan's fiscal year.

Nissan Motor Co. and Toyota Motor Corp. are expected to announce weaker quarterly results in coming days, with Japanese newspapers reporting that they will show full-year losses, too, for the first time in many years.

Japan's leading automakers have been hit not only by the extreme weakness of the U.S. market, traditionally their biggest source of profit, but also by a surge in the yen. Its rise to 13-year highs against the dollar increases the Japanese manufacturers' costs relative to export earnings.

In terms of the bottom line, "foreign exchange has a much larger negative impact, and volumes come second, believe it or not," on the Japanese automakers' earnings, said Kurt Sanger, a Tokyo-based analyst at Deutsche Bank.

Japan's largest business newspaper, the Nikkei, reported Friday that Toyota would record a net loss for the year ending on March 31 and an operating loss of $4.5 billion, nearly the triple the operating loss it forecast only a month ago.