It was the company's first quarter in the black in a year. The Japanese giant joins Honda and Nissan in upgrading its outlook, reinforcing hopes that automakers are through the worst of the global industry slump.

Toyota posted net earnings of 21.8 billion yen (240 million dollars) for the fiscal second quarter to September, down 84.4 percent from a year earlier but much better than the first quarter's 77.8-billion-yen loss.

A day after announcing it was quitting Formula One racing to slash costs, the company reported that operating profit dropped 65.8 percent year-on-year to 58.0 billion yen as revenue fell 24.4 percent to 4.23 trillion yen.

Toyota's vehicle sales declined in each region, but the company made progress in cutting costs, said vice president Yoichiro Ichimaru.

"In addition, demand-stimulating measures by governments worldwide have contributed to our revised targets for the full fiscal year," he added. "However, the outlook for global vehicle demand still remains uncertain."

Car sales in the United States, Japan and Europe have been supported by government stimulus measures designed to encourage people to buy new fuel-efficient cars and boost the ailing industry.

But such initiatives are being wound down in several countries. Auto sales have fallen sharply in the United States since the three-billion-dollar "Cash for Clunkers" programme there ended in August.

Toyota, the maker of the Corolla and the Prius hybrid, narrowed its annual net loss forecast to 200 billion yen from 450 billion and its operating loss projection to 350 billion yen from 750 billion.

It lifted its global sales goal for the current financial year to 7.03 million vehicles from 6.6 million.

For the first half to September, Toyota logged a net loss of 56 billion yen, compared with a year-earlier profit of 493.4 billion yen. The result was much better than the company's own forecast for a 250-billion-yen shortfall.

The company sold about 3.13 million vehicles worldwide in the six-month period, down 26.4 percent from the same period of the previous year.

Even though the North American operations returned to profit in the second quarter, "the business situation in the United States is still severe," said another Toyota vice president, Yukitoshi Funo.

The Japanese maker overtook US rival General Motors in 2008 as the world's top selling automaker but it fell into the red for the first time in the year to March 2009.

It has idled plants and slashed thousands of jobs as it tries to weather its biggest ever crisis.

Earlier this year it appointed Akio Toyoda as its new president, turning to the grandson of its founder to rescue it from its biggest ever crisis.

The Nikkei business daily reported Thursday that Toyota will spend 30-40 billion yen (330-440 million dollars) to build a research centre in China to develop vehicles for the fast growing market there.

The world's largest automaker will build a new facility with a full-scale test course near Shanghai, with construction likely to begin as early as next year, the newspaper said without naming its sources.

Toyota declined to comment on the report, although Ichimaru said the group would strive to offer the best models for customers in different regions.

"In this way we hope to earn profits," he said.

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