Honda Motor Co. raised its full-year profit forecast Wednesday as government stimulus measures in its largest markets boost demand for fuel-efficient vehicles.

Honda expects net income of ¥55 billion in the year ending March, compared with an earlier forecast of ¥40 billion, it said in a statement. The company unexpectedly reported a first-quarter profit of ¥7.5 billion.

The United States, Germany, Japan and China have begun stimulus programs that give consumers credits, tax breaks and subsidies for trading in old cars for new fuel-efficient models. The policies are aimed at stemming the plunge in auto demand that helped push General Motors Corp. and Chrysler LLC into bankruptcy.

"With the stimulus measures, the demand outlook is improving from what it was three months ago," said Mamoru Kato, an analyst at Tokai Tokyo Research Center in Nagoya. Honda didn't include the effect of government incentives in its forecast given in April.

Honda expects sales to recover in the second half of the year and is raising funds in anticipation of an increased demand for car loans.

The "cash-for-clunkers" program in the U.S., which gives consumers as much as $4,500 (about ¥425,000) for old cars, may spark 250,000 new car sales, lawmakers have said. Still, industrywide global light-vehicle output is forecast to fall 20 percent this year to 52.6 million units, according to automotive consulting CSM Worldwide.

Honda has cut production to reduce inventory to match auto demand. Output fell for an 11th straight month in June and totaled 1.32 million units for the first six months, a 34 percent decline. The carmaker's sales in Europe fell 12 percent in the first half.

The company made a first-quarter operating profit of ¥25.1 billion on sales of ¥2 trillion. It was expected to report a first-quarter net loss of ¥40 billion, according to the median of four analysts estimates compiled by Bloomberg.