Honda Motor Co raised its full-year profit forecast despite earnings diving by more than half last quarter, with "green" car incentives and growth in China expected to further boost vehicle sales.

Net profit for the July-September quarter fell 56.2 percent from a year earlier to 54 billion yen (US$587 million), the company said yesterday, hit by a strong yen and the weak auto market.

But Honda, Japan's No. 2 auto maker, now expects a net profit for the fiscal year ending March of 155 billion yen, nearly four times its initial outlook of 40 billion yen.

The auto maker also raised its forecast for sales this fiscal year to 3.4 million vehicles. It expects more sales in emerging Asian markets and also in the previously sluggish Japan where tax breaks and government-backed discounts for green vehicles are helping along a recovery.

Honda in July forecast vehicle sales of 3.29 million but the new projection does not reach the nearly 3.52 million vehicles it sold globally the previous fiscal year.

Honda said quarterly sales fell 27.2 percent from a year earlier to 2.057 trillion yen.

A strong yen weighed on Honda's results. Unfavorable currency exchange rates erased 79.7 billion yen from Honda's quarterly operating profit, it said.

Honda said auto sales grew in China, India and Japan during the quarter. Honda as well as rival Toyota Motor Corp, with their reputation for green cars, are enjoying the benefits of government incentives for fuel efficient and gasoline-electric hybrid cars.

Even in the United States, where vehicle sales fell during the quarter, a cash for clunkers program also helped sales, Honda said.