TOKYO -- Toyota Motor Corp. said on Tuesday that strong overseas vehicle sales mean it may have to boost production abroad.
"We have reached our upper limit in overseas production," President Fujio Cho told reporters at the launch of two new commercial vehicles, adding that assembly lines in North America and Europe were running at full capacity.
As a result, exports from Japan -- also helped by a weak yen until recently -- have increased.
Strong exports from Japan, particularly on the back of a soft yen, are potentially a prickly political problem, inviting cries of unfair advantage from foreign automakers.
"In the long term, if sales continue to rise, we will have to look at boosting the proportion of overseas production," Cho said.
But he said this did not necessarily mean Toyota was looking to make a major new investment, noting it had just increased capacity at its plant in Brazil and was upgrading its plant in South Africa.
"There's no need to hurry with a decision. We want to consider it for another two, three, four months," he said.
But any such move was contingent on Toyota's overseas sales maintaining their strength, and Cho said he had started to become a little concerned about the performance of the U.S. economy.
Although the U.S. vehicle market, where Toyota earns the vast majority of its profits, had performed much better than the industry expected after the September 11 attacks, recent signs such as the slide in U.S. stocks were worrying.
"The outlook has become unclear and it's all feeling a bit uncomfortable," he said, but added that while the situation bore watching, it was not so bad that Toyota needed to change current plans yet.
Cho also said the rapid pace of yen's recent strengthening against the dollar was worrying but he did not think it would continue at that pace.
The Japanese currency, which was around 120.40 yen to the dollar late on Tuesday, has risen about 10 percent since early April.
"In the long term, currency rates do reflect a country's economic fundamentals and so I don't think we are going to see continued rapid yen strengthening," he said
The yen's decline to an average of 125 yen in the year that ended in March from around 107-110 yen the previous year helped Japan's major automakers climb to record profits, boosting the yen value of income earned abroad and making exports more profitable.
Most Japanese automakers have assumed a rate of 125 yen this business year and Cho said that while a weaker yen was naturally better, levels between 110 and 120 yen per dollar were not unacceptable.
In that range, there has historically been a balance between the labour costs of the "Big Three" automakers -- General Motors, Ford Motor Co.and DaimlerChrysler AG -- and those of Toyota, he said.
On Japan, where Toyota sales have been weaker than expected, he said orders for new vehicles were strong and that he was looking for an improvement in July and August.