Tokyo - Shares of Toyota Motor Corporation fell sharply Wednesday after a report that Japan's leading carmaker will cut its earning forecast by 40 per cent owing to shrinking demand triggered by the global financial crisis.

Citing informed sources, the Japanese business daily Nikkei reported that Toyota has to adjust its profit forecast downwards by 40 per cent for the current business year, ending March 31.

Operating profits are to fall to 1.3 trillion yen (12.8 billion dollars), significantly lower than the predicted 1.6 billion yen, Nikkei wrote.

A company spokesman declined to comment ahead of the release of the second quarter results in November.

Toyota's shares plunged almost 430 yen, or 11.6 per cent, to 3,280 yen in reaction to the report, the biggest drop since 1987.

Demand is dropping not only in North America and Europe but also in emerging markets like China, where Toyota had been able to increase sales until recently.

Sales in the United States, the world's largest market for cars, dropped by 27 per cent in September compared with the same month last year.

Like other Japanese exporters, Toyota is hit twice - once by the decrease in demand and then by the strengthening of the yen against the dollar.

Toyota had already predicted a drop in operating profits by 29.5 per cent to 1.6 trillion yen. According to media reports, the company may also have to adjust its sales forecast, currently expecting a 4.9-per-cent drop to 25 trillion yen.

Toyota's US sales dropped by 32.2 per cent to 144,260 units in September, the fifth monthly slump in a row. Analysts believe the continued slide will make it difficult for the group, which also includes Daihatsu and Hino, a utility carmaker, to reach its sales target.

In July, Toyota reduced its sales target from 9.85 million units to 9.5 million units. (dpa)