TOKYO - Honda Motor Co. lifted its annual guidance far beyond market expectations after cost cuts drove quarterly profit to the strongest in a year and a half. The automaker said it anticipates further growth in the next fiscal year, Reuters reported.

Japan's No.2 automaker has weathered the industry's turmoil better than many rivals as its profitable and dominant motorcycle business cushioned the blow to global car demand from the financial crisis.

Honda's car business, heavy in fuel-efficient models such as the Civic and Jazz, has also turned up over the past three quarters thanks to government sales incentives such as the United States' cash-for-clunkers program last summer.

With its car sales roughly on track to reach 3.6 million vehicles next business year, a top executive said Honda should be able to make an operating profit of about $1.1 billion per quarter, providing a rare insight into the outlook for the financial year starting on April 1.

"Under these sales conditions, I see a fundamental ability to make 100 billion yen in operating profit every quarter," Executive Vice President Koichi Kondo told a news conference.

That would indicate a full-year operating profit of 400 billion yen ($4.39 billion) for the year to March 2011, or up 25 percent from Honda's revised guidance of 320 billion yen for this year.

Honda may also benefit from the global recall of millions of vehicles by larger rival Toyota Motor Corp., particularly in the key U.S. market, although Kondo -- and analysts -- said the opposite could also happen.

"There's a chance that the image of all Japanese cars will worsen in North America and elsewhere," said Mitsushige Akino, chief fund manager at Akiyoshi Investment Management. "We just don't know. There are things we still can't predict."

Honda had to initiate a recall of its own last week, saying it would recall some 646,000 of its Fit/Jazz and City models globally due to a faulty window switch after a child died when fire broke out in a car last year.