TOKYO: Toyota last week hiked its full-year profit forecast despite saying it expected to sell fewer cars due to weakness in the European market, as well as in China over a Sino-Japanese territorial row.

Japan’s biggest carmaker now expects to earn $9.7 billion in the fiscal year to March, up from $9.47 billion, but said sales would be $26.5 billion, trimming an earlier target of $27.4 billion. A strong yen and uncertainty in China and Europe weighed, with the upward boost in earnings expectations largely due to cost-cutting, including a decrease in labor and research and development expenses, it said.

The change was “due to uncertainties in the Chinese and European market environments,” Toyota said in a statement.

Now-expired vehicle subsidies in Japan would also weigh on consumer demand, said Toyota. The Japanese firm now expects to sell 8.75 million vehicles globally in the current fiscal year, down from an earlier 8.8 million forecast, and cast doubt on whether it would produce more than 10 million vehicles this year.

Japan’s carmakers have seen a drop in China revenue stemming from a territorial spat between Tokyo and Beijing.

Last week, Toyota said it expects to sell 200,000 fewer vehicles in China in the second half of its fiscal year from slumping demand in the world’s biggest vehicle market. Earlier, the carmaker said it was on track to produce 10.05 million vehicles in calendar 2012, but had now backed off that number.

“There is no official target within the company for 10 million vehicles,” Executive Vice President Satoshi Ozawa told a Tokyo press briefing.