Honda lowers profit forecast amid China-Japan dispute

Anti-Japan Protesters in China
Image caption The anti-Japan demonstrations in China saw several Japanese firms suspend operations in the country

Honda has cut is annual profit forecast after anti-Japan protests in China hurt its sales in the country, its second-largest market.

The protests, triggered by a row over disputed islands, saw Chinese consumers shun Japanese products. Honda's sales in China dipped by 40% in September.

The carmaker has forecast a net profit of 375bn yen ($4.7bn; £2.9bn) for the financial year ending 31 March 2013.

That is down from its earlier projection of 470bn yen.

Honda's shares fell 4.7% to 2,399 yen on the Tokyo Stock Exchange. The firm said it expected income at its China unit to decline further in wake of the dispute between the two countries.

Japanese firms usually release their earnings after the close of markets, but Honda posted its latest report on its website three hours ahead of schedule by mistake.

Earlier this month, Google made a similar mistake and released its third-quarter results early, leading to trading in its shares being suspended for two-and-a-half hours.

Further warnings?

The protests in China followed Japan's purchase of islands known as Senkaku in Japan and Diaoyu in China, over which China claims sovereignty and which are also claimed by Taiwan.

The protesters targeted Japanese brands and businesses associated with them.

As a result, various Japanese firms including supermarket operator Aeon, Uniqlo owner Fast Retailing, carmaker Toyota and consumer electronics giant Sony suspended some of their operations in the country.

Analysts said other Japanese carmakers may also lower their profit estimates.

"It's likely Toyota and Nissan are going to cut forecasts in the same way," said Fujio Ando, managing director at Chibagin Asset Management.

"A cut was to be expected because the problems with China weren't factored into forecasts."

Disaster recovery

Meanwhile, the carmaker continues to recover from last year's natural disasters in Japan and Thailand.

It reported a net profit 82.2bn yen in the three months to the end of September.

That is a 36% jump from the same period last year.

The firm said the recovery was driven primarily by increased car sales in the US and Japan, as well as the success of its new models.

However, it warned that its performance in the coming months might be affected by a slowdown of sales in Europe.

Several countries in the region have been hit by the debt crisis, which has led to a fall in consumer confidence and demand.