May 13 (Bloomberg) -- Nissan Motor Co., Japan's third- largest automaker, forecast the biggest drop in net income in nine years because of a stronger yen and weaker demand in the U.S., its most profitable market.

Net income will likely fall 30 percent to 340 billion yen ($3.3 billion) in the year ending March 31, compared with 482.3 billion yen in the previous year, the Tokyo-based automaker said in a statement today. Sales will fall 4.4 percent to 10.4 trillion yen. The forecast is lower than the 402.5 billion yen median estimate of 22 analysts compiled by Bloomberg.

Nissan's Chief Executive Officer Carlos Ghosn joins Toyota Motor Corp. and Honda Motor Co. in predicting lower earnings as the yen's 7.7 percent gain against the dollar this year erodes the value of overseas sales. Record gasoline prices and job insecurity have also cut demand for Titan pickup trucks and Pathfinder sport-utility vehicles.

``There's no way Japanese automakers can make up for the slump in the U.S. market,'' said Ichiro Takamatsu, chief investment officer at Alphex Investments Co. in Tokyo, which manages $60 million in assets. ``They are suffering from their huge reliance on the U.S.''

Nissan's operating profit, or sales minus the cost of goods sold and selling, general and administrative expenses, may fall 31 percent to 550 billion yen this fiscal year, compared with the 620 billion yen estimate by the analysts.

Toyota, Honda

``Take a look at all the headwinds we're facing in 2008,'' Ghosn said in an interview with Bloomberg Television today. ``We're not being pessimistic, we're being prudent.''

Including Nissan, all eight Japanese passenger carmakers have said operating profit will fall this fiscal year. Toyota, Japan's biggest automaker, on May 8 forecast operating profit will drop 30 percent for the period. Operating profit at Honda, the country's No. 2, may fall 32 percent, the company said on April 25.

Record gasoline prices and a sluggish economy in the U.S. may cut auto demand to the lowest since 1995, according to Standard & Poor's. Nissan has gained market share from General Motors Corp. and Ford Motor Co. as U.S. drivers opt for smaller, fuel-efficient models including Nissan's Versa compact car.

The price of regular gasoline gained 8 percent to $3.29 a gallon in the quarter ended March and cost $3.72 a gallon as of May 11.

Nissan rose 3.2 percent to 960 yen at the 3 p.m. close of trading in Tokyo, before the company announced earnings. The shares have fallen 22 percent so far this year.

Sales Forecast

In the U.S., sales may be little changed at 1.06 million vehicles for the year ending March 31, 2009, even as global sales may rise 3.4 percent to 3.9 million vehicles, Nissan said. The carmaker predicts growth will come from Russia and other emerging markets.

The company based its forecast on exchange rates of 100 yen to the dollar and 155 yen to the euro, compared with 114.4 yen and 161.6 yen a year earlier. A stronger yen will cut Nissan's operating profit by between 270 billion yen and 280 billion yen this fiscal year, Nissan said.

``Japanese manufacturers have to accept that the era of the cheap yen is probably over,'' said Michael Wynn-Williams, an automotive analyst for Global Insight Inc. in London.

Japanese automakers will also pay more for steel, as Nippon Steel Corp. and JFE Holdings Inc., Japan's two biggest steelmakers, seek a 10 percent increase in sheet steel prices as early as June, traders familiar with price talks said on April 22.

Mid-Term Plan

Under Nissan's new five-year business plan, the company will raise the annual dividend to 42 yen this fiscal year from 40 yen last year. It forecasts a dividend of 44 yen next fiscal year and 46 yen in the year starting April 2010, Ghosn said.

Nissan will introduce 60 new models over next five years to achieve an average of 5 percent sales growth over the period. The new models include at least three small cars for emerging markets. They will be built in five countries, starting in India and Thailand from 2010, Ghosn said.

In India, Nissan and Renault SA, France's second-largest carmaker, yesterday said they will build a $2,500 car for sale in 2011 with Bajaj Auto Ltd. to challenge Tata Motors Ltd.'s Nano as the country's cheapest car. Renault owns a 44 percent stake in Nissan. It also plans to work with Ashok Leyland Ltd. to build trucks.

Nissan aims to sell battery-powered cars in Japan and the U.S. by 2010 and introduce them globally by 2012. Nissan said it will roll out electric cars in Israel and Denmark in 2011.

In the fourth-quarter net income rose 68 percent to 137.6 billion yen, helped by a one-time gain from the sale of land.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net; Tetsuya Komatsu in Tokyo at tekomatsu@bloomberg.net.

Last Updated: May 13, 2008 05:55 EDT