Toyota, the industrial bellwether of the Japanese economy poised to become the world's biggest carmaker, has stunned markets by forecasting its first full-year slump in operating profits in nearly a decade.

In delivering the bad news, Katsuaki Watanabe, the company's president, also hinted that the group's expansion plans would increasingly focus on parts of the world that, unlike Japan and the United States, are “natural-resource-producing nations”.

The forecast came as Toyota declared its first slide in quarterly profits for three years. Income between January and March was down 28 per cent to 316 billion yen (£1.5 billion) - considerably less than the market had expected. Investors fear a similar slew of bad news from other Japanese carmakers, whose shares have been severely punished in the Tokyo market's extended rout since January.

The profit warning, although readily explicable by the US downturn and rising input costs, bursts a bubble that has surrounded Toyota since the beginning of this century.

For the past nine years, Toyota's ascendancy has seemed as relentless as the decline of the “big three” American carmakers in Detroit. Its rise has been symbolised by brisk global sales of its fuel-efficient hybrid models - vehicles pitched as the very antithesis of the gas-guzzling behemoths produced by Toyota's US rivals.

However, although Mr Watanabe was quick to assure investors that he had not “thrown in the towel” on the group's aggressive 10 per cent margin targets, the market has clearly deteriorated further than many expected.

“Although the business environment surrounding us is very severe, we want to take this as a chance to reinforce our company's business structure,” he said.

The soaring cost of crude oil, aggressive price rises by suppliers of raw materials and a drawn-out slide in the US dollar were among the factors blamed for Toyota's projected 29.5 per cent drop in earnings for the financial year.

Globally, high petrol prices are inherently bad for new car sales, analysts said, particularly in the US. In terms of sales, Toyota stands to benefit from a general switch from large, highly fuel-consumptive vehicles to smaller, more efficient models.

However, smaller cars have lower profit margins. Strong sales in emerging markets were, for the same reason, unable to offset the overall drop in profitability.

Investors said that the profit warning was most probably a spectacular piece of “kitchen-sinking” on the part of Toyota - a set of forecasts that were considerably lower than consensus estimates and based on the gloomiest possible view of the future.

Those assumptions appear to include further sharp price rises in steel, tyres and other parts and an exchange rate of Y100 to the dollar - some way below today's level.

Ed Merner, president of Atlantis Investment, said: “This is a very, very conservative company from a very, very conservative part of Japan. Its forecasts assume that everything that could go wrong will go wrong. It is ultimately why this company is in such good financial condition.”

Tsuyoshi Mochimaru, an analyst for Lehman Brothers in Tokyo, said: “There is no mistake that things are seriously tough - even for Toyota.”

Toyota still expects this year to surpass General Motors as the world's biggest carmaker after missing out on the title by just 3,100 vehicle sales in 2007. Toyota's vehicle sales have already outstripped GM's in the first quarter.

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