The world's largest automaker, Toyota Motor Corp, today said that it lost a net 77.8 billion yen, or $819 million, in the quarter that ended in June, as global vehicle sales continued to slump. But the Japanese automaker lowered its loss forecast for the current fiscal year by about 18 per cent, to $4.7 billion.

Toyota, which posted a record loss for the fiscal year that ended in March, said losses in the last three months were smaller than expected thanks to stringent cost-cutting and a decline in inventory. But sluggish sales in the United States, the company's biggest market, as well as a stronger yen, which erodes the value of overseas earnings, cut into its bottom line.

However, Toyota now sees narrower losses than initially expected for the fiscal first half ending 30 September as well as for the full year through 31 March, as it speeds up cost-cutting measures.

Government stimulus measures aimed at spurring purchases of low-emission vehicles in Japan and elsewhere provided somewhat of a boost, as booming sales of its redesigned Prius hybrid is also helping revive its plant operating efficiency after the company reduced production to lower inventory levels in the January-March quarter.

Steered by newly appointed president and founding-family member Akio Toyoda, Toyota now expects a net loss of 250 billion yen for the half ending September and a net loss of 450 billion yen for the full fiscal year. The company previously projected a net loss of 450 billion yen for the first half and a net loss of 550 billion yen for the full year.

Toyota sold 1.4 million automobiles globally in the quarter, 56 per cent less than a year earlier. Vehicle sales in North America dipped 47 per cent to 387,000.

Net sales for the April-June period dipped 38.3 percent from the same period last year to 3.836 trillion yen, contributing to an operating loss of 194.9 billion yen.

''Although we were able to make certain improvements in fixed cost and cost reduction efforts, the decline in vehicle sales and the appreciation of the Japanese yen had a severe impact on our earnings,'' Toyota senior managing director Takahiko Ijichi said in a statement.

Toyota has been hammered by the global economic slowdown just as it was expanding its line-up and had forayed into new markets. For the first time, the company is moving toward closing a major auto assembly plant - New United Motor Manufacturing Inc in northern California - after General Motors, its joint venture partner in the factory, pulled out of the arrangement.

Akio Toyoda, grandson of Toyota's founder, took the helm of the company in June and has reshuffled top management - including appointing a new North America chief - in a bid to get the company back on track.

This will be the second straight year of net loss and worse than the net loss of 436.94 billion yen in the last fiscal year, which was the firm's first annual net loss in 59 years. But its upbeat projection follows the lifted forecasts reported by Honda Motor Co and Toyota subsidiary Daihatsu Motor Co, which together suggest that the worst effects of the economic downturn on the auto industry may be over.

In tandem with such encouraging developments, auto sales in the US - Toyota's largest market last year - climbed at their highest pace in 11 months in July, as customers rushed to showrooms sparked by the government's 'cash for clunkers' incentive programme.

Toyota's US sales slipped 11 per cent to 174,872 vehicles, but the drop was slimmer than June's 31.9 per cent decline thanks to clunker deals which the company estimates boosted sales by 30,000 to 32,000 vehicles.

In the first six months of this year, the firm managed to retain the top spot in global auto sales, though General Motors Corp did better than its Japanese rival in the second quarter.

Benefiting from tax breaks and subsidies provided governments in the U.S. and Japan as well as reviving sales in China, Toyota lifted its global sales target for this fiscal year to 6.60 million vehicles from 6.50 million.