Global demand for Japanese products has plunged
Japan's biggest carmaker Toyota has forecast its first annual loss in 71 years due to plummeting sales and a surge in the value of the yen.
The firm said it expected a loss of 150bn yen (£1.1bn) in yearly operating profits - from its core operations.
Company chief Katsuaki Watanabe said the current downturn was of a size that came only "once in a hundred years".
Japan posted a trade deficit in November of $2.5bn (£1.7bn) as exports fell at a record rate.
The rising yen saw export levels down 26.7% from a year earlier, the ministry of finance said.
The carmaker had recorded an operating profit of 2.27 trillion yen last year.
Toyota said it still expected to make a profit on a net level for the year ended March but has cut its forecast sharply to 50bn yen, down from a previous estimate of 550bn yen.
It is the second profit warning by Toyota in less than seven weeks.
This latest estimate is far lower than its net profit of 1.7 trillion yen earned the previous year.
Toyota's president Katsuaki Watanabe said the company now expected to sell 8.96 million vehicles around the world this year, down 4% from the previous year.
The drop in vehicle sales over the last month was "far faster, wider and deeper than expected", he said.
Unlike previous years, Mr Watanabe gave no sales goal for 2009.
Toyota said in a statement it was cutting its profits forecast because of the soaring yen "as well as a review of sales plans following a faster than expected contraction of the auto market".
The company has said it will cut thousands of temporary workers' jobs at its plants in Japan, but said its full-time employees will be protected.
Japanese carmakers have all been hurt by plummeting car sales in their key overseas markets, including the US.
The surging yen has eroded their overseas earnings and also hit their profits - the dollar has fallen to 13-year lows against the Japanese currency.
Honda last week cut its annual profit forecast by 67% and outlined a list of counter-measures such as putting off non-urgent investments to prop up its profitability.
In the United States, President Bush threw the struggling carmakers General Motors and Chrysler a lifeline of up to $17.4bn to stave off bankruptcy as they reel under slumping demand.
Commenting on Toyota's latest announcement, analysts said it underlined the problems now facing Japan's car exporters.
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If people want to buy their cars it will survive if not it will fail just the same as every non-viable business.
"This is very, very, very bad. There's a chance that they could fall into the red in the next business year as well," said Koichi Ogawa of Daiwa SB Investments.
"This is also not just a problem for Toyota. What is good for Toyota is good for the Japanese economy."
Fujio Ando of Chibagin Asset Management added: "This shows how rapidly and badly the auto sector has deteriorated."
"Toyota will likely revise down its earnings numbers or sales forecast again in late January or February as I don't think the business environment will become any better," he said.
Japan typically runs a trade surplus due to strong demand for its products - but the surging yen has hit demand for its goods.
Japanese exports fell sharply to all areas but those to the US were worst-hit, plunging 33.8% - also a record drop.
Shipments to the European Union were down 30.8% while those to China fell 24.5%, the biggest fall since 1995, said Reuters news agency.
Exports to the rest of Asia declined 26.7%.
Imports were also down - 14.4% overall - due in part to lower oil prices.
Japan's economy - the world's second-largest, after the US - has slipped into its first recession in seven years after two quarters of negative growth in a row.
The government has forecast zero growth in the year ending March 2010.