By Edwina Gibbs
TOKYO, June 28 (Reuters) - Export numbers for Japan's automakers may be going through the roof but signs of weakness in the U.S. economy and a strengthening yen and have become darkening clouds threatening their potential profit growth.
Japanese vehicle exports soared 25.6 percent in May from a year earlier to 360,246 units, according to data released on Friday by Japan's Automobile Manufacturers' Association.
Automakers such as second-ranked Honda Motor Co scored particularly well with a jump of 45 percent, as did Nissan Motor Co with 41 percent and Mitsubishi Motors Corp with 61 percent.
Special factors appeared to boost the numbers somewhat, however, with Honda and Mitsubishi saying May exports last year were especially weak.
On last May's data, Honda said it had concentrated on producing cars for the domestic market, Mitsubishi cited shipping problems, and Nissan was seen as lacking popular models.
Even so, exports are expected to continue to show some underlying strength in the coming months, analysts say, although the second half of the business year to next March could be a different story.
"Automakers book exports up to three months ahead so I don't expect a sharp tail-off," said Seiji Sugiura, auto analyst at Nomura Securities.
"But with the yen now having risen to 120 yen to the dollar, it looks like the second half is going to be difficult," he said.
Compared with a swathe of dismal corporate earnings from much of Japan Inc in the last business year, the nation's major automakers put in a stellar performance, posting record profits on the back of a particularly soft yen.
The weaker Japanese currency, which softened some 18 yen to 125 yen per dollar last business year, boosted the yen value of earnings garnered in overseas markets and made exports more profitable.
Toyota Motor Corp's popular upmarket Lexus ES 300 sedan, for example, is not built in the United States and became a huge money spinner for the nation's largest automaker last year.
For this business year, most automakers have assumed an average exchange rate of 125 yen to the dollar -- a level that does not give them much in the way of currency benefits, although they are looking for profit growth on expectations of more cost-cutting and higher sales.
But the dollar's 10 percent decline against the yen since April to around 120 yen has meant that where Japanese automakers' exchange rate assumptions once looked conservative, they now seem optimistic.
Along with the loss of the potential windfall gains from the currency, key reasons behind the dollar's decline such as worries about the U.S. economy could spell weaker-than-expected sales for Japanese automakers in their most important market.
Underlining those fears was a 5.7 percent drop in U.S. May vehicle sales, well below industry forecasts, and auto executives say the WorldCom accounting scandal has not helped. The U.S. telecoms giant caused markets to plunge on Wednesday when it admitted overstating results by $3.8 billion.
"We are keeping a careful watch on U.S. industry," Mazda Motor Corp President Lewis Booth told reporters .
"Things feel fairly volatile in the U.S. at the moment and it depends how spooked consumers are about what's happening to Wall Street and frankly what's happening with matters of corporate governance, which have been pretty horrific."