There was better than expected news from Toyota Motor today as it said its annual loss would be smaller than forecast earlier thanks to deeper cost cuts and worldwide measures to boost slow car sales. But it remained cautious about sustained recovery.

The globe’s top automaker reported its third straight quarterly loss as sales sank at double digit rates in Japan, Europe and the United States due to mounting job losses, continued tight access to credit and volatile fuel prices.

The company said it now expected a net loss of JPY450bn (US$4.7bn) for the financial year ending 31 March 2010 compared with an earlier forecast of JPY550bn (US$5.7bn).

Toyota booked a first-quarter loss of JPY77.8bn (US$810m) compared with net profit of JPY353.7bn (US$3.7bn) a year earlier. Q1 unit sales fell 785,000 to 1.4m.

North American sales were down 342,000 to 387,000. Europe sales fell 88,000 to 213,000. Japan sales were off 105,000 units to 407,000.

Toyota narrowed its full year operating loss forecast to JPY750bn (US$7.8bn) from JPY850bn (US$8.8bn) and said it expected to boost Japanese sales for the first time in five years, helped by government incentives on fuel efficient vehicles.

The company had received 245,000 orders in Japan for the new Prius hybrid by 24 July after setting a monthly target of 10,000 units. It has has now raised its global total sales forecast to 6.6m vehicles, up from 6.5m in May. The additional 100,000 units will all be sold in Japan, with volume boosted especially by the Prius and Lexus‘ first hybrid only model, the HS250h.

Toyota also raised its cost savings target to JPY900bn (US$9.3bn) from JPY800bn (US$8.3bn) by accelerating quality-related cuts and reducing labour hours by sharing work.