Oct. 27 (Bloomberg) -- Honda Motor Co., Japan’s second- largest carmaker, almost tripled its full-year profit forecast as government stimulus measures boosted demand for fuel- efficient vehicles in China and Japan.

The automaker expects net income of 155 billion yen ($1.7 billion) in the year ending March, compared with an earlier forecast of 55 billion yen, it said in a statement today. Second-quarter profit totaled 54 billion yen, exceeding analyst estimates.

Honda raised its full-year forecast for global vehicle sales 3.2 percent to 3.4 million as governments spur demand by offering car buyers rebates and tax cuts. The carmaker increased second-quarter sales in Japan and China, helping offset declines in Europe and the U.S.

“Honda will continue to gain from emerging markets, especially China, going into next year,” said Masayuki Kubota, who oversees the equivalent of $1.7 billion in assets at Daiwa SB Investments Ltd. in Tokyo. “Once the U.S. market also starts to pick up, Honda is poised to gain there too.”

The carmaker’s sales in Asia outside Japan rose 22 percent in the July-September period to 249,000 vehicles, helped by surging demand for automobiles in China. Honda’s sales grew 3.9 percent in Japan, where the government is offering car buyers trade-in rebates of as much as 250,000 yen.

Second Quarter

Honda fell 1.9 percent to 2,845 yen at the 3 p.m. close of trading on the Tokyo Stock Exchange, before the earnings announcement. The stock has gained 49 percent this year, compared with a 24 percent increase for larger domestic rival Toyota Motor Corp.

Second-quarter profit at Honda fell 56 percent from a year earlier as the sales increases in Asia failed to make up for declining U.S. and European demand. A stronger yen also eroded earnings from overseas. The result still beat the 45 billion yen median of four analyst estimates compiled by Bloomberg.

The yen averaged 13 percent higher against the dollar last quarter than a year earlier. The stronger Japanese currency cut operating profit by 79.7 billion yen to 65.5 billion yen, Honda said today.

Honda’s vehicle sales in the U.S., traditionally its most profitable market, plunged 25 percent to 300,000 in the three- month period. Demand dropped 16 percent in Europe.

U.S. demand is recovering more slowly than expected, Honda’s Executive Vice President Koichi Kondo said in Tokyo today. The company expects industrywide U.S. sales of 10 million vehicles in the current fiscal year, down from a previous estimate of 10.5 million, he said.

Toyota and Nissan Motor Co. have also raised sales outlooks in markets including Japan and China citing government stimulus measures. Toyota Industries Corp. and Toyoda Gosei Co., which make parts for Toyota Motor, yesterday reported preliminary profits for the six months through September, after previously forecasting net losses.

Toyota Motor, Japan’s biggest carmaker, reports second- quarter earnings on Nov. 5.

To contact the reporter on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net

Last Updated: October 27, 2009 03:36 EDT