The Prius maker now expects to bank a net profit of 1.95 trillion yen for the fiscal year to March 2018, up from an earlier estimate of 1.75 trillion yen.
During the previous fiscal year, Toyota suffered its first drop in annual profit for five years, which it blamed on the cost of customer incentives in the key US market.
Toyota said operating profit from its domestic and European markets showed moderate gains for the first half. But operating profit from North America fell by more than half due to a decline in sales and swelling incentives.
“Toyota has benefited from a weak yen, but growing incentives in North America have pressured its profit,” said Satoru Takada, an analyst at TIW, a Tokyo-based research and consulting firm.
“Foreign exchange will remain a decisive factor for the second half,” Takada told AFP before the announcement.
The level of Japan’s currency against the dollar and other units is a key factor in Toyota’s competitiveness abroad and in the value of profits it earns abroad.
The yen has moved sharply in recent years, surging after Britain’s shock vote to exit the European Union boosted demand for the safe-haven currency.
The trend briefly reversed course after Donald Trump’s November US presidential election victory boosted the dollar against the yen and other currencies.
Without forex tailwinds, Toyota could have seen its operation profits fall further, said Osamu Nagata, Toyota executive vice president.
North American motorists continue flocking to buy pick-up trucks and SUVs, while the prices of used sedans continue to slip, he said.
“There are many things we must do,” such as reducing incentives in the US market, he said, but added the business environment stayed “tough” as raw materials were also at high levels.
Japan’s auto industry is facing uncertainty over Trump’s drive to support US firms over foreign imports, a stance that has raised fears of a global trade war.
Trump has targeted Toyota with strong criticism of its ongoing project to build a new factory in Mexico, threatening it with painful tariffs.
The US leader, who left Japan for South Korea earlier Tuesday after winding up the first leg of his Asian tour, lashed out at the US trade relationship with Japan while in Tokyo.
“We want fair and open trade but right now, our trade with Japan is not fair and open,” Trump told business leaders on Monday.
Toyota senior executive Nobuhiko Murakami kept mum on Trump’s remarks, saying such an issue and views have existed “for a long time” and his firm has no comment on the subject or US policies now.
Last week Honda Motor revved up its annual profit outlook on strong motorcycle sales and a lower yen, but the more upbeat figures still represented a drop from the previous year.
Nissan is scheduled to report its first-half results on Wednesday after it suspended all domestic production due to an inspection scandal.
The firm restarted production on Tuesday after apologising to its customers.