Japanese carmakers piled more misery into the world's automotive markets with forecasts of tumbling profits at Honda and production cuts from Nissan.

Battered by weak demand from Japanese buyers and the soaring value of the yen, which is crimping export demand, the tall ships of the global car industry are trimming their sails.Honda said yesterday that it would cut 450 jobs as it gave warning that its net income for the year to the end of March 2009 would be 185 billion yen, (£1.3billion) a 69 per cent fall against the previous year's profit.

Honda said that the situation was worsening “day by day” and that it saw no sign of recovery. In an effort to keep a lid on its working capital, the company is cutting production for the Japanese market by 54,000 units.

In a grim forecast for the year ahead, the company said: “Honda will develop business plans based on an assumption that the situation will worsen next year and will navigate the company through this challenge.”

Meanwhile, Nissan announced a further cut in production of 78,000 units in Japan. The carmaker has in total reduced its Japanese output by 225,000, representing about 6 per cent of Nissan's original forecast of 3.8 million cars.

Japanese manufacturers are reining in their spending plans, and yesterday Honda outlined a series of cutbacks, including a 10 per cent pay cut for its directors, auditors and operating officers, which will take effect at the beginning of the new year. In addition, a series of capital projects are being delayed, including the building of three factories in Japan.

Capacity expansions planned for India and Turkey have been shelved for the time being, and the release in Japan of its luxury Acura brand,which has sold well in the US in previous years, is to be pushed back beyond 2010.

Honda said that it expected to sell 3.65million cars during the financial year, a fall of 7 per cent on previous estimates. For the current calendar year the carmaker said that US sales would be down by 8 per cent, with the situation “worsening every day in all regions”. European sales were flat, but Honda gave warning that the financial crisis was accelerating in Russia and Eastern Europe.

Worldwide, the motor industry is suffering from rapidly shrinking demand as fearful consumers cancel planned purchases of new cars. Uncertainty over the future of General Motors, Chrysler and Ford, which are seeking financial help from the US Government, is worsening market uncertainty.

Toyota is expected to follow its Japanese rivals with a forecast of declining sales, and yesterday the world's leading car manufacturer began a campaign to bring down steel costs. Toyota is demanding a price cut of 30percent from Nippon Steel Corporation in an attempt to bring down raw material costs and boost flagging margins.

Toyota's demand for lower steel prices highlights a very sudden reversal of fortune for steelmakers, which had been riding high supported by strong demand for steel from China.

A sudden reduction in demand from the automotive and construction industries has put steelmakers on the back foot and prompted the shutdown of blast furnaces worldwide in an effort to prevent the emergence of a glut.

In Italy, Fiat said that it would be delaying the launch of its 2009 models, including the Alfa Romeo 149, after announcing work suspensions at its factories this month. “What is the point of making the most beautiful car in the world if no one is going to buy it?” Luca di Montezemolo, the chairman of Fiat, asked.

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