Toyota has announced net losses of 77.8 billion yen (£483m) in the period from April to June, although this is less than the 200bn yen (£1.2bn) predicted.
As a result Toyota has also upgraded its predictions for the period to next March, saying it expects to lose 450bn yen (£2.8bn) rather than 550bn yen (£3.4bn).
Toyota has been able to lessen the impact of the economic downturn through aggressive cost cutting, as well as benefitting from stimulus aid from governments and faster-than-expected sales growth in China.
Akio Toyoda, who took over as chief executive in June, has shaken up management and promised “to do everything possible” to return the group to profit in 2010-2011.
Toyota has slashed production, frozen new investments and eliminated thousands of contract jobs in response to the slump.
Of Japan’s top carmakers, only Honda expects to earn a profit this year.