Financial Analysis

Toyota Motor Corporation
07 August 2002


       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
                           RESULTS OF OPERATIONS

All financial information discussed in this section is derived from Toyota's
consolidated financial statements.  These financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States.

Overview

Toyota's business segments are automotive operations, financial services
operations and all other operations.  Automotive operations is Toyota's most
significant segment, accounting for approximately 90% of Toyota's total revenues
before the elimination of intersegment revenues and 96% of Toyota's operating
income before the elimination of intersegment revenues and costs for the year
ended March 31, 2002.  Toyota's primary markets based on vehicle unit sales for
the year ended March 31, 2002 were: Japan (40%), North America (32%) and Europe
(13%).

Automotive Market Environment

The worldwide automotive market is highly competitive and cyclical.  Demand for
automobiles in each market can vary substantially from year to year.  Demand
depends to a large extent on general economic conditions in a given market, the
cost of purchasing and operating automobiles and the availability and cost of
credit and fuel.

Toyota's vehicle unit sales in Japan decreased during fiscal 2002 resulting
primarily from an overall industry decline in the Japan market and increased
competition from other domestic manufacturers.  This decrease followed increases
in Toyota's vehicle unit sales in this market during fiscal 2000 and 2001
resulting from the active introduction of new models that met customer needs and
the strong sales efforts of domestic dealers.  Toyota's vehicle unit sales in
North America and Europe increased steadily during fiscal 2002, 2001 and 2000,
reflecting strong demand for Toyota vehicles in both these regions.  Toyota
vehicle unit sales increased in these markets during fiscal 2002 despite a
general slowdown in global economic growth, particularly in the United States,
beginning in the second half of 2000.  In the aggregate, Toyota's vehicle unit
sales in all other markets increased during fiscal 2002, following an increase
during fiscal 2001 and a decrease during fiscal 2000.

Toyota's share of total vehicle unit sales in each market is influenced by the
quality, price, design, performance, safety, reliability, economy and utility of
its vehicles compared with those offered by other manufacturers.  The timely
introduction of new or modified vehicle models is also an important factor in
satisfying customer demand.  Toyota's ability to satisfy changing customer
preferences can affect its revenues and earnings significantly.

The profitability of Toyota's automotive operations is affected by many factors.
These factors include:

•         vehicle unit sales volumes,

•         the mix of vehicle models and options sold,

•         the levels of price discounts and other sales incentives and marketing
          costs,

•         the cost of customer warranty claims and other customer satisfaction
          actions,

•         the cost of research and development and other fixed costs,

•         the ability to control costs,

•         the efficient use of production capacity, and

•         changes in the value of the Japanese yen and other currencies in which
          Toyota does business.

Changes in laws, regulations, policies and other governmental actions can also
materially impact the profitability of Toyota's automotive operations.  These
laws, regulations and policies include those affecting environmental matters and
vehicle safety, fuel economy and emissions that add significantly to the cost of
vehicles.  The European Union has approved a directive that requires
manufacturers to be financially responsible for taking back end-of-life vehicles
and dismantling and recycling these vehicles.  You should read 'Legislation 
Regarding End-of-life Vehicles'.  Many governments also regulate local content, 
impose tariffs and other trade barriers and enact price or exchange controls 
which can limit an automaker's operations and can make the repatriation of 
profits to an automaker's home country difficult.  Changes in these laws, 
regulations, policies and other governmental actions may affect the production, 
licensing, distribution or sale of Toyota's products, cost of products or 
applicable tax rates.

The worldwide automotive industry is in a period of globalization and
consolidation, which may continue for the foreseeable future.  As a result, the
competitive environment in which Toyota operates is likely to intensify.  Toyota
believes it has the resources, strategies and technologies in place to compete
effectively in the industry as an independent company for the foreseeable
future.

In August 2001, Toyota acquired an additional ownership interest in Hino Motors,
Ltd. ('Hino') for Y66.3 billion in cash.  As a result, Toyota's ownership
interests in Hino increased by 13.6% to 50.2% and Toyota's consolidated
financial statements include the accounts of Hino from the acquisition date.
Previously Hino was accounted for using the equity method.  Hino is primarily
engaged in the design, manufacturing and sale of trucks, buses and related
parts.

Financial Services Operations

The worldwide financial services market is highly competitive. The market for
automobile financing has grown as more consumers are financing their purchases,
particularly in North America and Europe.  Toyota faces increasing competition
in its financial services operations from financial institutions including
banks, savings institutions and leasing companies.  These leasing companies
include those affiliated with other automobile manufacturers, in particular
those of the major U.S. producers.  As competition increases, spreads earned on
financing transactions may decrease and market share may also decline as
customers obtain financing for Toyota vehicles from alternative sources.

Toyota's portfolio of finance receivables and investment in vehicles and
equipment on operating leases continued to increase during fiscal 2002 resulting
primarily from the continued expansion of its financial services operations in
North America.

Toyota's financial services operations include loans and leasing programs for
customers and dealers.  Toyota believes that its ability to provide financing to
its customers is an important value added service.  Toyota intends to continue
to expand its network of finance subsidiaries to bring its financial services
business to more countries.  During fiscal 2001, Toyota established a
wholly-owned subsidiary, Toyota Financial Services Corporation, to oversee the
management of Toyota's finance companies worldwide and to enter into new
automobile-related finance areas.  Toyota completed the launch in the United
States of an expanded tiered pricing program for retail vehicle contracts.  The
objective of the program is to better match customer risk with contract rates
charged to allow profitable purchases of a wider range of risk levels.
Implementation of the tiered pricing program has contributed to increased
contract yields and increased credit losses during fiscal 2002 in connection
with purchases of higher risk contracts.

Toyota launched the credit card business in Japan (the new credit card, the TS
(3) card) in April 2001 and the issuance of credit cards has been expanded
generally since July 2001.  At March 31, 2002, Toyota had 2.4 million
cardholders.

Toyota has continued to originate operating leases to finance new Toyota
vehicles.  These leasing activities are subject to residual value risk.
Residual value risk arises when the lessee of a vehicle does not exercise the
option to purchase the vehicle at the end of the lease.  The number of vehicles
returned at the end of leases has grown in recent years.  For example, fewer
than 20% of vehicles leased by Toyota Motor Credit Corporation, Toyota's
financing subsidiary located in the United States, were returned at the end of
the applicable lease period during fiscal 1996, compared to a return rate of
approximately 50% during fiscal 2001 and 2002.  To avoid a loss on a vehicle
returned to Toyota at the end of the lease, Toyota must resell or re-lease the
vehicle at or above the residual value of the vehicle.  If Toyota is unable to
realize the residual value for the vehicle, it will incur a loss at the end of
the lease.  This loss would offset any earnings on the lease.  In recent years,
the resale values of returned vehicles have been depressed, primarily because of
an increased supply of used vehicles in the market that has depressed market
prices.  In addition, sales incentives in the automotive industry, particularly
in the United States, increased substantially in fiscal 2002, adversely
affecting resale values.  To the extent that sales incentives remain an integral
part of sales promotion (reducing new vehicle prices), resale prices of used
vehicles and, correspondingly, the carrying value of Toyota's leased vehicles
could be subject to further downward pressure.  As a result of the depressed
market prices of used vehicles, Toyota has incurred increased losses related to
residual values during the past three years.

In addition, funding costs can affect the profitability of Toyota's financial
services operations.  Funding costs are affected by a number of factors, some of
which are not in Toyota's control.  These factors include general economic
conditions, prevailing interest rates and Toyota's financial strength.  Funding
costs during fiscal 2002 decreased as a result of lower interest rates primarily
in the United States.

At March 31, 2001, Toyota had a 49.9% ownership interest in The Chiyoda Fire and
Marine Insurance Company, which was accounted for using the equity method of
accounting, and a 19.3% ownership interest in Dai-Tokyo Fire and Marine
Insurance Company Limited, which was accounted for as a marketable security
investment.  On April 1, 2001, Chiyoda and Dai-Tokyo merged with Dai-Tokyo being
the surviving corporation and Dai-Tokyo changed its name to Aioi Insurance Co.,
Ltd.  Toyota's ownership interest in Aioi as a result of the merger was 33.4%
and Toyota accounts for its ownership in Aioi using the equity method of
accounting.

Other Business Operations

Toyota's other business operations include its information technology related
businesses, including certain intelligent transport systems and an e-commerce
marketplace called Gazoo.com, and the design and manufacture of prefabricated
housing.

Toyota was engaged in the telecommunications business through its subsidiary,
IDO Corporation. IDO was a provider of cellular services in Japan.  On October
1, 2000, IDO merged with two Japanese telecommunication companies and Toyota's
ownership interest in DDI Corporation (currently, KDDI Corporation), the
surviving entity, became 13.3%.  At the date of the transaction, IDO ceased to
be a consolidated subsidiary of Toyota and Toyota's 13.3% ownership interest in
KDDI was accounted for as a marketable security investment.

On April 1, 2001, Toyota sold its industrial equipment business to Toyota
Industries Corporation (formerly, Toyoda Automatic Loom Works, Ltd.), an
affiliate of Toyota Motor Corporation that is accounted for using the equity
method of accounting.

Toyota does not expect its other business operations to provide a material
contribution to Toyota's consolidated results of operations.

Currency Fluctuations

Toyota is sensitive to fluctuations in foreign currency exchange rates.  In
addition to the Japanese yen, Toyota is principally exposed to fluctuations in
the value of the U.S. dollar and the euro and to a lesser extent the British
pound.  Toyota's consolidated financial statements, which are presented in
Japanese yen, are affected by foreign currency exchange fluctuations through
both translation risk and transaction risk.  Changes in foreign currency
exchange rates may positively or negatively affect Toyota's revenues, gross
margins, operating costs and expenses, operating income, net income and retained
earnings.

Translation risk is the risk that Toyota's financial statements for a particular
period or for a particular date will be affected by changes in the prevailing
exchange rates of the currencies in those countries in which Toyota does
business against the Japanese yen.  Even though the fluctuations of currencies
against the Japanese yen can be substantial and, therefore, significantly impact
comparisons with prior periods and among various geographic markets, the
translation effect is a reporting consideration and does not reflect Toyota's
underlying results of operations.  Toyota does not hedge against translation
risk.

Transaction risk is the risk that the currency structure of Toyota's costs and
liabilities will deviate from the currency structure of sales proceeds and
assets.  Transaction risk relates primarily to sales proceeds from Toyota's non-
domestic sales produced in Japan and, to a lesser extent, sales proceeds from
Toyota's continental European sales produced in the United Kingdom.

Toyota believes that the location of its production facilities in different
parts of the world has significantly reduced the level of transaction risk.  As
part of its globalization strategy, Toyota has localized much of its production
by constructing production facilities in the major markets in which it sells its
vehicles.  In 2001, Toyota produced 54% of Toyota's non-domestic sales outside
Japan.  In North America, 59% of vehicles sold in 2001 were produced locally.
In Europe, 36% of vehicles sold in 2001 were produced locally.  Local operations
permit Toyota to purchase many of the supplies and resources used in the
production process in a manner that matches the currencies of local revenues
with the currencies of local expenses.

Toyota also enters into currency borrowings and other hedging instruments to
address a portion of its transaction risk.  This has reduced, but not
eliminated, the effects of foreign currency exchange rate fluctuations, which in
some years can be significant.  See note 19 to the consolidated financial
statements for additional information regarding the extent of Toyota's use of
derivative financial instruments to hedge foreign currency exchange rate risks.

Generally, a weakening of the Japanese yen against other currencies has a
positive effect on Toyota's revenues, operating income and net income.  A
strengthening of the Japanese yen against other currencies has the opposite
effect.  The Japanese yen has generally been weaker against the U.S. dollar
during fiscal 2002 and the second half of fiscal 2001 than in the respective
corresponding periods in the previous year.  The Japanese yen strengthened
against the U.S. dollar during fiscal 2000 and the first half fiscal 2001.  In
addition, the Japanese yen has generally been weaker against the euro during
fiscal 2002 than during fiscal 2001, whereas the Japanese yen strengthened
against the euro during fiscal 2000 and 2001.

Segmentation

Toyota's most significant business segment is its automotive operations.  Toyota
carries out its automotive operations as a global competitor in the worldwide
automotive market and uses a worldwide approach to the management of its
automotive operations.  In doing so, Toyota's management allocates resources to,
and assesses the performance of, its automotive operation on a worldwide basis
as a single segment.  Toyota does not manage any subset of its automotive
operations, such as domestic or overseas operations or parts, as separate
segments.

The management of the automotive operations is aligned on a functional basis
with managers having oversight responsibility for the major operating functions
within the segment.  Management assesses financial and non-financial data such
as units of sale, units of production, market share information, vehicle model
plans and plant location costs to allocate resources within the automotive
operations.

Geographical Breakdown

The following table sets forth Toyota's revenues from external customers in each
of its geographical markets for the past three fiscal years.

                                                                        Year Ended March 31,
                                                          2000                  2001                  2002
                                                                            (in millions)

Japan.....................................                 Y6,280,553     Y6,462,066            Y6,437,931
North America.....................                          4,517,648     4,802,167             5,548,847
Europe....................................                  1,088,095     1,013,967             1,265,509
Other Regions.......................                          763,481     858,870               1,064,587


Results of Operations - Fiscal 2002 Compared with Fiscal 2001

Net Revenues

Toyota had net revenues for fiscal 2002 of Y14,316.9 billion, an increase of
Y1,179.8 billion, or 9.0%, compared to the prior year.  This increase
principally reflects the favorable impact of foreign currency translation rates,
the combined impact of sales price increases and changes in sales mix, the
impact of the consolidation of Hino during fiscal 2002 and the impact of
increased financings.  These increases were partially offset by the impact of
the disposal of the telecommunications business during fiscal 2001 and the
impact of the disposal of the industrial equipment business during fiscal 2002.
 Eliminating the difference in the yen value used for translation purposes,
revenues would have been approximately Y13,502.7 billion during fiscal 2002, a
2.8 % increase compared to the prior year.  Toyota's net revenues include sales
of products which increased during fiscal 2002 by 8.3 % to Y13,626.2 billion
compared to the prior year and financing operations which increased during
fiscal 2002 by 24.9% to Y690.7 billion compared to the prior year.  Eliminating
the difference in the yen value used for translation purposes, revenues from
sales of products would have been approximately Y12,876.0 billion, a 2.3 %
increase, and revenues from financing operations would have been approximately
Y626.7 billion, a 13.3% increase, during fiscal 2002 compared to the prior year.
Revenues for fiscal 2002 decreased by 0.4 % in Japan, increased by 15.5 % in
North America, increased by 24.8% in Europe and increased by 24.0% in all other
markets compared with the prior year.  Eliminating the difference in the yen
value used for translation purposes, revenues would have decreased by 0.4% in
Japan, increased by 2.2% in North America, increased by 12.9% in Europe and
increased by17.6% in all other markets compared to the prior year.

The following is a discussion of net revenues for each of Toyota's business
segments.  The net revenue amounts discussed represent amounts before the
elimination of intersegment revenues.

Automotive Operations Segment

Net revenues from Toyota's automotive operations constitute the largest
percentage of Toyota's revenues.  During fiscal 2002, net revenues for Toyota's
automotive operations increased by 12.5% to Y13,194.0 billion from Y11,723.0
billion in the prior year.  The increase resulted primarily from the Y748.3
billion favorable impact of foreign currency translations rates, the Y384.9
billion impact of the consolidation of Hino during fiscal 2002 and the Y366.3
billion combined impact of sales price increases and changes in sales mix.
Eliminating the difference in the yen value used for translation purposes,
automotive operations revenues would have been approximately Y12,445.7 billion
during fiscal 2002, a 6.2% increase compared to the prior year.    Eliminating
the difference in the yen value used for translation purposes and the impact of
the consolidation of Hino, automotive operations revenues would have been
approximately Y12,060.7 billion during fiscal 2002, a 2.9% increase compared to
the prior year.  Revenues in Japan were favorably impacted by higher vehicle
unit sales to export markets, higher average sales prices on these sales to
export markets and the consolidation of Hino during fiscal 2002 that were
partially offset by decreased vehicle unit sales in Japan and lower average unit
sales prices for sales in Japan resulting from the continuing market shift in
Japan to lower priced vehicles.  Revenues in North America were favorably
impacted by foreign currency translation rates, vehicle unit sales growth and
higher average unit sales prices during fiscal 2002.  Revenues in Europe were
favorably impacted by foreign currency translation rates, higher average unit
sales prices and vehicle unit sales growth during fiscal 2002.  Revenues in all
other markets were favorably impacted by foreign currency translation rates,
higher average unit sales prices and vehicle unit sales growth during fiscal
2002. Vehicle unit sales in North America, Europe and all other markets
increased during fiscal 2002 compared with the prior year and decreased in
Japan.  Excluding the impact of the consolidation of Hino, North American,
European and all other markets sales reflect vehicle unit sales growth of 2.7%,
5.2% and 3.7%, respectively, compared to the prior year, while vehicle unit
sales in Japan decreased by 5.3% compared to the prior year.  Overall, excluding
the impact of the consolidation of Hino, Toyota had a slight decrease in vehicle
unit sales.

Financial Services Operations Segment

Net revenues for Toyota's financial services operations increased by Y127.0
billion, or 22.2%, to Y698.0 billion during fiscal 2002 compared with the prior
year.  This increase resulted primarily from the impact of a higher volume of
financings and the favorable impact of foreign currency translation rates during
fiscal 2002.  Eliminating the difference in the yen value used for translation
purposes, financial services operations revenues would have been approximately
Y633.0 billion during fiscal 2002, a 10.8% increase compared with the prior
year.

All Other Operations Segment

Net revenues for Toyota's other businesses decreased by Y340.5 billion, or
31.8%, to Y728.8 billion during fiscal 2002 compared with the prior year.  This
decrease resulted primarily from the Y243.5 billion impact of the disposal of
the telecommunications business during fiscal 2001 and the Y241.5 billion impact
of the disposal of the industrial equipment business during fiscal 2002.
Excluding revenues of the telecommunication business and the industrial
equipment business, net revenues for all other business increased by Y144.5
billion, or 24.7%, to Y728.8 billion during fiscal 2002, reflecting the increase
in sales of intelligent transportation systems and increases in sales of other
businesses.

Operating Costs and Expenses

Operating costs and expenses increased by Y876.9 billion, or 7.1%, to Y13,223.2
billion during fiscal 2002 compared with the prior year.  The increase resulted
primarily from the impact on cost of products sold of sales mix changes, the
Y385.7 billion impact of the consolidation of Hino during fiscal 2002, the
Y367.2 billion impact of foreign currency translation rates and the Y189.7
billion impact of higher selling, general and administrative expenses during
fiscal 2002.  These increases were partially offset by the Y260.0 billion impact
of cost cutting efforts, the Y231.1 billion impact of the disposal of the
telecommunications business during fiscal 2001 and the Y237.4 billion impact of
the disposal of the industrial equipment business during fiscal 2002.

Continued cost cutting efforts reduced costs and expenses for fiscal 2002 by
approximately Y260.0                billion over what would have otherwise been
incurred.  These cost cutting efforts relate to ongoing value engineering and
value analysis activities, the use of common parts that result in a reduction of
part types and other manufacturing initiatives designed to reduce the costs of
vehicle production.

Cost of products sold increased by Y655.9 billion, or 6.4%, to Y10,874.5 billion
during fiscal 2002 compared with the prior year.  This increase (before the
elimination of intersegment amounts) reflects an increase of Y999.8 billion, or
10.5 %, for the automotive operations and a decrease of Y230.3 billion, or 27.7
%, for the all other operations segment.  The increase for the automotive
operations reflects primarily the impact of sales mix changes, the impact of
higher costs resulting from foreign currency translation, the impact of the
consolidation of Hino during fiscal 2002 and the impact of increased warranty
provisions that were partially offset by the impact of continued cost cutting
efforts.  The decrease for the all other operations segment reflects the Y127.2
billion impact of the disposal of the telecommunications business during fiscal
2001 and the Y209.1 billion impact of the disposal of the industrial equipment
business during fiscal 2002.

Cost of products sold as a percentage of revenues from sales of products
decreased to 79.8% during fiscal 2002 from 81.2% in the prior year.  This
reflects the favorable impact of foreign currency rates on revenues related to
Toyota's non-domestic sales produced in Japan and the favorable impact of
continued cost cutting efforts that were partially offset by the impact of the
disposal of the telecommunications business during fiscal 2001, the impact of
increased warranty provisions and the impact of the consolidation of Hino during
fiscal 2002.

Cost of financing operations increased by Y31.9 billion, or 7.5%, to Y459.2
billion during fiscal 2002 compared with the prior year.  The increase resulted
primarily from the impact of increased residual value losses, the impact of
foreign currency translation rates and the impact of a higher volume of
financings during fiscal 2002 that were partially offset by lower costs of
financing caused by lower interest rates in the United States.  The cost of
financing operations as a percentage of revenue from financing operations
decreased to 66.5% during fiscal  2002 from 77.3% in the prior year.  This
change was principally the result of the increased revenues of financing caused
by the impact of foreign currency translation rates and lower prevailing
interest rates in the United States resulting in lower funding costs that were
partially offset by the impact of increased residual value losses.

Research and development expenses increased to Y589.3 billion during fiscal 2002
from Y475.7 billion in the prior year, as a result of increased activities
relating primarily to the development of new models, vehicle safety, new vehicle
energy and environmental technologies to promote Toyota's strength in a
competitive market for the future and the impact of the consolidation of Hino
during fiscal 2002.

Selling, general and administrative expenses (after the elimination of
intersegment amounts) increased by Y189.2 billion, or 11.1%, to Y1,889.6 billion
during fiscal 2002 compared with the prior year.  This increase (before the
elimination of intersegment amounts) reflects an increase of Y178.8 billion, or
12.4%, for the automotive operations, an increase of Y73.0 billion, or 61.3%,
for the financial services operations and a decrease of Y111.9 billion, or
46.0%, for the other operations segment.  The increase for the automotive
operations consisted primarily of the increase in research and development
expenses, the increase in personnel costs principally in North America and
Europe, the increase in sales and promotional costs, the impact of foreign
currency translation rates and the impact of the consolidation of Hino during
fiscal 2002 that were partially offset by continuing cost reduction efforts.
The increase for the financial services operations reflects higher provisions
for credit losses resulting from the increase in finance receivables, higher
provisions for credit losses resulting from the tiered pricing program for
retail vehicle contracts which was launched in 2001, the impact of foreign
currency translation rates, increased costs for expansion of operations and the
impact of restructuring the field operations in the United States.  The decrease
for the all other operations segment reflects the impact of disposal of the
telecommunications business during fiscal 2001 and the impact of disposal of the
industrial equipment business during fiscal 2002.

Selling, general and administrative expenses as a percentage of revenue
increased to 13.2% during fiscal 2002 from 12.9% in the prior year.  Selling,
general and administrative expenses increased as a percentage of revenue
primarily due to increases in the financial service operations. These increases
were partially offset in the all other operations segment by the impact of the
disposal of the telecommunications business during fiscal 2001 and continuing
cost reduction efforts.  Selling, general and administrative expenses in the
automotive operations as a percentage of segment revenues were 12.3% during
fiscal 2002, unchanged from the prior year.  Selling, general and administrative
expenses in the financial services operations as a percentage of segment
revenues were 27.5% during fiscal 2002, compared to 20.8% in the prior year,
reflecting higher provisions for credit losses and the impact of restructuring
the field operations in the United States.  Selling, general and administrative
expenses in the all other operations segment as a percentage of segment revenues
were 18.0% during fiscal 2002 compared to 22.7% in the prior year, primarily due
to the disposal of the telecommunications business during fiscal 2001.

Operating Income

Toyota's operating income increased by Y302.9 billion, or 38.3%, to Y1,093.6
billion during fiscal 2002 compared with the prior year.  Operating income was
affected primarily by the favorable impact of the foreign currency exchange rate
changes as well as the impact of continuing cost reduction efforts that were
partially offset by the impact of the disposal of the telecommunications
business during fiscal 2001.

During fiscal 2002, operating income (before the elimination of intersegment
profits) increased by Y220.9 billion, or 35.4%, in Japan; Y70.2 billion, or
36.1%, in North America, Y6.4 billion, or 96.6 %, in other markets and operating
loss decreased by Y0.7 billion, or 3.0%, in Europe compared with the prior year.
  The increase in Japan relates primarily to the favorable impact of the foreign
currency exchange rate changes relating to export sales, the impact of higher
average unit sales prices on export sales, the impact of increased exports to
North America and Europe and cost reduction efforts that were partially offset
by the impact of lower domestic average unit sales prices and the impact of
decreased domestic vehicle unit sales.  The increase in North America relates
primarily to the favorable impact of the depreciation of the yen to the U.S.
dollar and the impact of increased vehicle unit sales.  The increase in other
markets relates to improved vehicle unit sales  and the impact of higher average
unit sales prices. The decrease in operating loss in Europe relates primarily to
the significantly improved operating results resulting from the impact of
increased vehicle unit sales and the impact of higher average unit sales prices
that were partially offset by the unfavorable impact of derivative financial
instruments used to manage exposure to foreign currency fluctuation from an
economic perspective where Toyota was unable to apply hedge accounting.

The following is a discussion of operating income for each of Toyota's business
segments.  The operating income amounts discussed represent amounts before the
elimination of intersegment profits.

Automotive Operations Segment

Operating income from Toyota's automotive operations increased by Y292.4
billion, or 38.2%, to Y1,057.9 billion during fiscal 2002 compared with the
prior year.  Operating income was favorably affected primarily by the impact of
the foreign currency exchange rate changes, continued cost reduction efforts and
the impact of the consolidation of Hino during fiscal 2002 that were partially
offset by the impact of increased research and development expenses.

Financial Services Operations Segment

Operating income from Toyota's financial services operations increased by  Y13.4
billion, or 42.4%, to Y45.1 billion during fiscal 2002 compared with the prior
year.  Operating income was favorably affected primarily by the impact of lower
prevailing interest rates in the United States resulting in lower funding costs,
the impact of increased spreads on financings and the impact of increased
financings.  These increases were partially offset by increased residual value
losses, higher provisions for credit losses, the costs for expansion of
operations and the impact of restructuring the field operations in the United
States.

All Other Operations Segment

Operating loss from Toyota's other businesses decreased by Y1.6 billion to Y3.0
billion during fiscal 2002 compared with the prior year.  This decline resulted
primarily from the decrease of intelligent transportation system expenses that
were partially offset by the impact of the disposal of the telecommunications
business during fiscal 2001 and the impact of the disposal of the industrial
equipment business during fiscal 2002.

Other Income and Expenses

Interest and dividend income decreased by Y15.6 billion, or 21.8%, to Y55.8
billion during fiscal 2002 compared with the prior year due to lower prevailing
interest rates in the United States and Japan.

Interest expense decreased by Y14.1 billion, or 34.5%, to Y26.8 billion during
fiscal 2002 compared with the prior year due to lower prevailing interest rates
in the United States and Japan.

Foreign exchange loss decreased by Y5.9 billion during fiscal 2002 compared with
the prior year.  Foreign exchange gain and loss include the differences between
the value of foreign currency denominated sales translated at prevailing
exchange rates and the value of the sales amounts settled during the year,
including those settled using foreign exchange forward contracts.  Foreign
exchange losses decreased due to the moderate movement of exchange rates during
fiscal 2002, as compared with the trend of depreciation of the yen during the
second half of fiscal 2001.

Other income changed by Y442.5 billion to a loss of Y150.5 billion during fiscal
2002 from an income of Y292.0 billion in the prior year.  During fiscal 2001,
there was a gain of  Y181.0 billion on the disposal of the ownership interest in
IDO and a gain of Y161.2 billion relating to the contribution of certain
marketable securities to an employee retirement benefit trust.  During fiscal
2002, there were gains of  Y75.1 billion on exchange transactions relating to
financial institutions where Toyota held ownership interests and losses of
Y259.2 billion relating to other than temporary impairments on investment
securities of which Y212.9 billion related to Toyota's investment in KDDI.

Income Taxes

Provision for income taxes decreased by Y101.1 billion during fiscal 2002
compared with the prior year primarily as a result of decrease in income before
income taxes and decreased provision for taxes on undistributed earnings of
affiliated companies accounted for by the equity method.  The effective tax rate
for fiscal 2002 decreased to 43.5% from 47.3% for the prior year due primarily
to decreased provision for taxes on undistributed earnings of affiliated
companies.

Minority Interest in Consolidated Subsidiaries and Equity in Earnings of
Affiliated Companies

Minority interest in consolidated subsidiaries decreased by Y1.3 billion to
Y10.8 billion during fiscal 2002 compared with the prior year.  The decrease in
minority interest in consolidated subsidiaries reflects decreased earnings of
Daihatsu and the impact of disposal of IDO during fiscal 2001 that were
partially offset by the impact of the consolidation of Hino during fiscal 2002.

Equity in earnings of affiliated companies during fiscal 2002 decreased by Y85.5
billion to Y18.1 billion during fiscal 2002 compared with the prior year as a
result of the impact of the recognition of gains on securities relating to the
contribution of marketable securities to employee retirement benefit trusts
during fiscal 2001 and a loss by Aioi during fiscal 2002.

Net Income

Toyota's net income decreased by Y118.3 billion, or 17.5%, to Y556.6 billion
during fiscal 2002 compared with the prior year.

Other Comprehensive Income and Loss

Other comprehensive loss changed by Y 172.3 billion, to an income of Y15.2
billion during fiscal 2002 compared with the prior year.  This change resulted
primarily from a decrease in an unrealized holding losses on securities during
fiscal 2002 to Y3.6 billion compared to Y305.0 billion in the prior year and
were partially offset by an increase in other comprehensive loss to Y114.3
billion relating to minimum pension liability adjustment compared to Y13.4
billion in the prior year and a decrease in a foreign currency translation
adjustments gain during fiscal 2002 to Y133.9 billion compared to a gain of
Y161.3 billion in the prior year.

Results of Operations - Fiscal 2001 Compared with Fiscal 2000

Net Revenues

Toyota had net revenues for fiscal 2001 of Y13,137.1 billion, an increase of
Y487.3 billion, or 3.9%, compared to the prior year.  This increase principally
reflects the favorable impact of increased vehicle unit sales and higher average
unit sales prices and was partially offset by the unfavorable impact of foreign
currency translation rates and the impact of the disposal of the
telecommunications business during fiscal 2001.  Eliminating the difference in
the yen value used for translation purposes, revenues would have been
approximately Y13,473.7 billion during fiscal 2001, a 6.5 % increase compared to
the prior year.  Toyota's net revenues include sales of products which increased
during fiscal 2001 by 3.8 % to Y12,583.9 billion compared to the prior year and
financing operations which increased during fiscal 2001 by 4.7% to Y553.1
billion compared to the prior year.  Eliminating the difference in the yen value
used for translation purposes, revenues from sales of products would have been
approximately Y12,901.3 billion, a 6.4 % increase, and revenues from financing
operations would have been approximately Y572.3 billion, an 8.3% increase,
during fiscal 2001 compared to the prior year.  Revenues for fiscal 2001
increased by 2.9 % in Japan, increased by 6.3 % in North America, decreased by
6.8% in Europe and increased by 12.5% in all other markets compared with the
prior year.  Eliminating the difference in the yen value used for translation
purposes, revenues would have increased by 2.9% in Japan, increased by 7.4% in
North America, increased by 10.0% in Europe and increased by 25.9% in all other
markets compared to the prior year.

The following is a discussion of net revenues for each of Toyota's business
segments.  The net revenue amounts discussed represent amounts before the
elimination of intersegment revenues.

Automotive Operations Segment

Net revenues from Toyota's automotive operations constitute the largest
percentage of Toyota's revenues.  During fiscal 2001, net revenues for Toyota's
automotive operations increased by 5.6% to Y11,723.0 billion from Y11,098.9
billion in the prior year.  The increase resulted primarily from the Y736.8
billion impact of increased vehicle unit sales and the Y204.8 billion combined
impact of sales price increases and changes in sales mix, partially offset by
the Y317.4 billion unfavorable impact of foreign currency translations rates
during fiscal 2001.  Eliminating the difference in the yen value used for
translation purposes, automotive operations revenues would have been
approximately Y12,040.4 billion during fiscal 2001, an 8.5% increase compared to
the prior year.   Revenues in Japan were impacted by increased vehicle unit
sales and the introduction of new models that were partially offset by a
continuing market shift in Japan to lower priced vehicles.  Revenues in North
America were impacted by vehicle unit sales growth and sales price increases
during fiscal 2001 that were partially offset by the unfavorable impact of
foreign currency translation rates.  Revenues in Europe were unfavorably
impacted by foreign currency translation rates during fiscal 2001 that were
partially offset by vehicle unit sales growth.  Revenues in all other markets
were favorably impacted by vehicle unit sales growth during fiscal 2001 that
were partially offset by the unfavorable impact of foreign currency translation
rates. Vehicle unit sales in Japan, North America, Europe and all other markets
increased during fiscal 2001 compared with the prior year.  Japanese, North
American, European and all other markets sales reflect vehicle unit sales growth
of 6.7%, 2.6%, 9.0% and 14.4%, respectively, compared to the prior year.

Financial Services Operations Segment

Net revenues for Toyota's financial services operations increased by Y36.9
billion, or 6.9%, to Y571.1 billion during fiscal 2001 compared with the prior
year.  This increase resulted primarily from the increase in the volume of, and
higher interest rates on, financings that was partially offset by the
unfavorable impact of foreign currency translation rates during fiscal 2001.
Eliminating the difference in the yen value used for translation purposes,
financial services operations revenues would have been approximately Y590.3
billion during fiscal 2001, a 10.5% increase compared with the prior year.

All Other Operations Segment

Net revenues for Toyota's other businesses decreased by Y138.4 billion, or
11.5%, to Y1,069.4 billion during fiscal 2001 compared with the prior year.
This decrease resulted from the Y235.7 billion impact of the disposal of the
telecommunications business during fiscal 2001.  Excluding revenues of
telecommunication business, net revenues for all other business increased by
Y97.3 billion, or 13.4%, to Y825.8 billion during fiscal 2001, reflecting the
higher revenues of the industrial equipment business.

Operating Costs and Expenses

Operating costs and expenses increased by Y395.1 billion, or 3.3%, to Y12,346.3
billion during fiscal 2001 compared with the prior year.  The increase resulted
primarily from the Y665.7 billion impact on cost of products sold of increased
vehicle unit sales and sales mix, the Y98.2 billion impact of increased volume
related to all other operations and the Y33.2 billion impact of increased volume
related to financial services operations during fiscal 2001.  These increases
were partially offset by the Y208.1 billion impact of foreign currency
translation rates, the Y180.0 billion impact of cost cutting efforts and the
Y205.6 billion impact of disposal of the telecommunications business during
fiscal 2001.

Continued cost cutting efforts reduced costs and expenses for fiscal 2001 by
approximately Y180.0 billion over what would have otherwise been incurred.
These cost cutting efforts relate to ongoing value engineering and value
analysis activities, the use of common parts that result in a reduction of part
types and other manufacturing initiatives designed to reduce the costs of
vehicle production.  As an additional cost saving initiative, Toyota has
finished reducing domestic annual production capacity of Toyota branded vehicles
from a level of 4 million vehicles during fiscal 1999 to a level of 3 to 3.5
million vehicles.

Cost of products sold increased by Y378.8 billion, or 3.8%, to Y10,218.6 billion
during fiscal 2001 compared with the prior year.  This increase (before the
elimination of intersegment amounts) reflects an increase of Y434.8 billion, or
4.8%, for the automotive operations and a decrease of Y 37.7 billion, or 4.3%,
for the all other operations segment.  The increase for the automotive
operations reflects primarily the impact of increased vehicle unit sales during
fiscal 2001 that was partially offset by the impact of lower costs resulting
from foreign currency translation rates during the period as well as the impact
of continued cost cutting efforts.  The decrease for the all other operations
segment reflects the Y129.0 billion impact of the disposal of the
telecommunications business during fiscal 2001 that was partially offset by the
impact of the increase in cost of products reflecting increased revenue in the
industrial equipment business.

Cost of products sold as a percentage of revenues from sales of products remains
unchanged at 81.2% during fiscal 2001.  This reflects the unfavorable impact of
foreign currency rates on revenues related to Toyota's non-domestic sales
produced in Japan and, to a lesser extent, revenues related to Toyota's
continental Europe sales produced in the United Kingdom and the unfavorable
impact of the disposal of the telecommunications business during fiscal 2001.
These were almost completely offset by the impact of continued cost cutting
efforts.

Cost of financing operations increased by Y25.3 billion, or 6.3%, to Y427.3
billion during fiscal 2001 compared with the prior year.  The increase resulted
primarily from the impact of increased volume of financing operations and
increased costs of financing caused by higher interest rates in the United
States that was partially offset by the impact of foreign currency translation
rates.  The cost of financing operations as a percentage of revenue from
financing operations increased to 77.3% during fiscal year 2001 from 76.1% in
the prior year.  This change was principally the result of the increased costs
of financing caused by higher prevailing interest rates in the United States.

Research and development expenses increased to Y475.7 billion during fiscal 2001
from Y451.2 billion in the prior year, as a result of increased activities
relating primarily to the development of new models, vehicle safety and
environmental technologies.

Selling, general and administrative expenses (after the elimination of
intersegment amounts) decreased by Y9.0 billion, or 0.5%, to Y1,700.4 billion
during fiscal 2001 compared with the prior year.  This decrease (before the
elimination of intersegment amounts) reflects an increase of Y62.8 billion, or
4.5%, for the automotive operations, an increase of Y19.2 billion, or 19.2%, for
the financial services operations and a decrease of Y69.7 billion, or 22.3%, for
the other operations segment.  The increase for the automotive operations
consisted primarily of a corresponding increase resulting from increased vehicle
unit sales that was partially offset by the impact of foreign currency
translation rates during fiscal 2001, reduced sales promotion costs and
continuing cost reduction efforts.  The increase for the financial services
operations reflects increased costs for expansion of operations, including the
start-up costs for the credit card business, and higher provisions for credit
losses resulting from the increase in finance receivables.  These increases were
partially offset by the impact of foreign currency translation rates during
fiscal 2001.  The decrease for the all other operations segment reflects the
Y76.5 billion impact of the disposal of the telecommunications business during
fiscal 2001.

Selling, general and administrative expenses as a percentage of revenue
decreased to 12.9% during fiscal 2001 from 13.5% in the prior year.  Selling,
general and administrative expenses decreased as a percentage of revenue
primarily due to the impact on the automotive operations of increased sales of
vehicles, reduced sales promotion costs and continuing cost reduction efforts
during fiscal 2001 as well as the impact of disposal of the telecommunications
business during fiscal 2001.  These were partially offset by the impact of
foreign currency rates on revenues related to Toyota's non-domestic sales
produced in Japan and, to a lesser extent, revenues related to Toyota's
continental Europe sales produced in the United Kingdom in the automotive
segment and increased costs for expansion of operations and higher provisions
for credit losses in financing operations.  Selling, general and administrative
expenses in the automotive operations as a percentage of segment revenues were
12.3% during fiscal 2001, compared to 12.5% in the prior year.  Selling, general
and administrative expenses in the financial service operations as a percentage
of segment revenues were 20.8% during fiscal 2001, compared to 18.7% in the
prior year.  Selling, general and administrative expenses in the all other
operations segment as a percentage of segment revenues were 22.7% during fiscal
2001 compared to 25.9% in the prior year.

Operating Income

Toyota's operating income increased by Y92.2 billion, or 13.2%, to Y790.7
billion during fiscal 2001 compared with the prior year.  Operating income was
affected primarily by vehicle unit sales growth and sales price increases as
well as continuing cost reduction efforts that was partially offset by the
appreciation of the yen against the U.S. dollar and the euro and the related
impact of the foreign currency exchange rate changes during fiscal 2001 as well
as the impact of disposal of the telecommunications business during fiscal 2001.

During fiscal 2001, operating income (before the elimination of intersegment
profits) increased by Y83.5 billion, or 15.5%, in Japan; Y35.1 billion, or
22.0%, in North America and Y3.0 billion, or 81.4 %, in other markets compared
with the prior year.  These increases were partially offset by an increase in
operating loss of  Y15.0 billion, or 151.5%, in Europe compared with the prior
year.  The increase in Japan relates primarily to the favorable impact of
increased vehicle unit sales in Japan, increased exports to North America and
Europe and cost reduction efforts which were partially offset by the unfavorable
impact of the appreciation of the yen to the U.S. dollar and the euro.  The
increase in North America relates primarily to the favorable impact of increased
vehicle unit sales, sales price increases and expanded production at new
production facilities which were partially offset by the impact of the
depreciation of the U.S. dollar to the yen.  The increase in other markets
relates to improved vehicle unit sales in certain Asian markets and the combined
impact of sales price increases and changes in sales mix.  The decline in Europe
relates primarily to the sharp depreciation of the euro to the yen and start-up
costs of the new French plant that was partially offset by increased vehicle
unit sales and sales price increases.

The following is a discussion of operating income for each of Toyota's business
segments.  The operating income amounts discussed represent amounts before the
elimination of intersegment profits.

Automotive Operations Segment

Operating income from Toyota's automotive operations increased by Y126.6
billion, or 19.8%, to Y765.6 billion during fiscal 2001 compared with the prior
year.  Operating income was favorably affected primarily by increased vehicle
unit sales, sales price increases, changes in sales mix and continued cost
reduction efforts.  These increases were partially offset by the appreciation of
the yen against the U.S. dollar and the euro and the appreciation of the British
pound to the euro.

Financial Services Operations Segment

Operating income from Toyota's financial services operations slightly decreased
by 0.1%, to Y31.7 billion during fiscal 2001 compared with the prior year.
Operating income was adversely affected primarily by the increased costs for
expansion of operations, including the start-up costs for the credit card
business, and higher provisions for credit losses as well as the appreciation of
the yen to the U.S. dollar and the euro.  These decreases were offset by the
impact of increased financings.

All Other Operations Segment

Operating income from Toyota's other businesses decreased by Y31.0 billion to a
loss of Y4.6 billion during fiscal 2001 compared with the prior year.  This
decline resulted primarily from a decrease in earnings of the telecommunications
business for the first half of fiscal 2001 and the impact of the disposal of the
telecommunications business on October 1, 2001.

Other Income and Expenses

Interest and dividend income decreased by Y2.6 billion, or 3.5%, to Y71.4
billion during fiscal 2001 compared with the prior year due to lower prevailing
interest rates in Japan.

Interest expense decreased by Y6.5 billion, or 13.6%, to Y40.9 billion during
fiscal 2001 compared with the prior year due to lower prevailing interest rates
in Japan.

Foreign exchange gain decreased by Y97.2 billion to a loss of Y6.0 billion
during fiscal 2001 compared with the prior year.  Foreign exchange gain and loss
include the differences between the value of foreign currency denominated sales
translated at prevailing exchange rates and the value of the sales amounts
settled during the year, including those settled using foreign exchange forward
contracts.  Foreign exchange gains decreased due to the moderate movement of
exchange rates during the first half of fiscal 2001 and the trend of
depreciation of the yen during the second half of fiscal 2001, as compared with
the trend of significant appreciation of the yen in the prior year.

Other income increased by Y227.8 billion during fiscal 2001 compared with the
prior year as a result of the gain of  Y181.0 billion on the disposition of the
ownership interest in IDO and the gain of Y161.2 billion relating to the
contribution of certain marketable securities to an employee retirement benefit
trust as discussed under ' - Liquidity and Capital Resources'.  These
increases were partially offset by a decrease in unrealized gains on trading
securities and an increase in other non-operating expenses.

Income Taxes

Provision for income taxes increased by Y101.1 billion during fiscal 2001
compared with the prior year primarily as a result of increased earnings of
consolidated companies and increased provision for taxes on undistributed
earnings of affiliated companies accounted for by the equity method.  The
effective tax rate for fiscal 2001 decreased slightly to 47.3% from 48.0% for
the prior year due primarily to decreased provision for valuation allowance as a
percentage of pre-tax earnings which was partially offset by increased provision
for taxes on undistributed earnings of affiliated companies.

Minority Interest in Consolidated Subsidiaries and Equity in Earnings of
Affiliated Companies

Minority interest in consolidated subsidiaries increased by Y4.5 billion to
Y12.1 billion during fiscal 2001 compared with the prior year.  The increase in
minority interest in consolidated subsidiaries reflects increased earnings of
Daihatsu that were partially offset by a decrease in earnings of IDO for the
first half of fiscal 2001 and the impact of the disposal of IDO on October 1,
2001.

Equity in earnings of affiliated companies during fiscal 2001 increased by Y72.0
billion to Y103.6 billion during fiscal 2001 compared with the prior year levels
as a result of a general improvement in operating results of affiliated
companies as well as the recognition of gains on securities relating to the
contribution of marketable securities to employee retirement benefit trusts.

Net Income

Toyota's net income increased by Y193.0 billion, or 40.0%, to Y674.9 billion
during fiscal 2001 compared with the prior year.

Other Comprehensive Loss

Other comprehensive loss increased by Y 66.0 billion, to  Y157.1 billion during
fiscal 2001 compared with the prior year.  The other comprehensive loss resulted
primarily from an unrealized holding losses on securities during fiscal 2001 of
Y305.0 billion compared to a gain of Y82.9 billion in the prior year and an
other comprehensive loss of Y13.4 billion relating to minimum pension liability
adjustment.  These losses were partially offset by a foreign currency
translation adjustments gain during fiscal 2001 of Y161.3 billion compared to a
loss of Y181.3 billion in the prior year.

Liquidity and Capital Resources

Historically, Toyota has funded its capital expenditures and research and
development activities primarily through cash generated by operations.  Toyota
expects to fund its capital expenditures and research and development activities
in fiscal 2003 primarily through cash and cash equivalents on hand, operating
cash flow and issuance of debt instruments.

Toyota funds its financing programs for customers and dealers, including leasing
programs, from both operating cash flow and through borrowings by its finance
subsidiaries.  Toyota seeks to expand its ability to raise funds locally in
markets throughout the world by expanding its network of finance subsidiaries.

Net cash provided by operating activities was Y1,532.7 billion for fiscal 2002,
compared to Y1,428.0 billion for the prior year.  The increase in net cash
provided by operating activities resulted primarily from increased operating
income that was partially offset by changes in operating assets and liabilities.

Net cash used in investing activities was Y1,810.8 billion for fiscal 2002,
compared to Y1,318.7 billion for the prior year.  The increase in net cash used
in investing activities resulted primarily from increased investment in
financing receivables, increased investment in vehicles and equipment on
operating leases and increased capital expenditures.  These increases were
partially offset by lower net purchases of marketable securities.

Net cash provided by financing activities was Y392.1 billion for fiscal 2002,
compared to net cash used in financing activities of Y166.7 billion for the
prior year.  The increase in net cash provided by financing activities resulted
primarily from increased proceeds from issuance of long-term debt.

Total capital expenditures for property, plant and equipment, excluding vehicles
and equipment on operating leases, were Y940.5 billion during fiscal 2002, an
increase of 23.4% over the Y762.3 billion in expenditures for the prior year.
The increase in capital expenditures resulted primarily from the impact of the
consolidation of Hino, the completion of several overseas plant expansions in
conjunction with the localization of production and property, plant and
equipment for the development of new models, vehicles safety, new vehicles
energy and environmental technologies.

Total expenditures for vehicles and equipment on operating leases were Y608.0
billion during fiscal 2002, an increase of 38.5% over the Y439.1 billion in
expenditures in the prior year.  The change resulted primarily from a shifting
from finance leases to operating leases.

Toyota expects capital expenditures for property, plant and equipment, excluding
vehicles leased to others, to increase to approximately Y980 billion during
fiscal 2003.  Toyota's expected capital expenditures include approximately Y60
billion for the continued expansion of overseas investments as part of Toyota's
localization of its production activities.

Based on currently available information, Toyota does not expect environmental
matters to have a material impact on its financial position, results of
operations, liquidity or cash flow during fiscal 2003.

Cash and cash equivalents were Y1,657.2 billion at March 31, 2002.  Most of cash
and cash equivalents are held in Japanese yen.  In addition, time deposits were
Y20.0 billion and marketable securities were Y600.7 billion at March 31, 2002.

Liquid assets, which Toyota defines as cash and cash equivalents, time deposits,
marketable debt securities and its investment in monetary trust funds, increased
during fiscal 2002 by Y190.2 billion, or 6.4%, to Y3,145.0 billion.

Trade accounts and notes receivable, net increased during fiscal 2002 by Y185.1
billion, or 14.6%, to Y1,456.9 billion, reflecting the impact of the
consolidation of Hino and the change in foreign currency translation rates.

Inventories increased during fiscal 2002 by Y85.6 billion, or 9.8%, to Y961.8
billion, reflecting the impact of the consolidation of Hino and the change in
foreign currency translation rates.

Finance receivables, net increased during fiscal 2002 by Y989.9 billion, or
26.7%.  The change resulted primarily from the continuing increase in the
portion of sales by dealers that are being financed through Toyota's financial
services operations and the change in foreign currency transaction rates.  As of
March 31, 2002, finance receivables were geographically distributed as follows:
in North America 71.4%, in Japan 15.5%, in Europe 7.1% and in all other markets
6.0%.  Toyota maintains programs to sell finance receivables through limited
purpose subsidiaries and sold finance receivables under these programs totaling
Y613.8 billion during fiscal 2002.  Toyota regularly accesses the international
capital markets to finance its vehicle sales and lease financing programs.

Marketable securities and other securities investment including those included
in current assets decreased during fiscal 2002 by Y218.6 billion, or 9.3%, to
Y2,131.9 billion, reflecting a decline in market values at March 31, 2002
compared to the prior year.

Property, plant and equipment increased during fiscal 2002 by Y649.1 billion, or
14.6%, reflecting the impact of the consolidation of Hino, an increase of
capital expenditures and the change in foreign currency translation rates.

Accounts payable increased during fiscal 2002 by Y130.5 billion, or 10.1%,
reflecting the impact of the consolidation of Hino and the change in foreign
currency translations rates partially offset by the timing of payments.

Accrued expenses increased during fiscal 2002 by Y114.0 billion, or 14.0%,
reflecting the increase in sales related expenses, the impact of the
consolidation of Hino and the change in foreign currency translation rates.

Income taxes payable increased during fiscal 2002 by Y75.5 billion, or 29.9 %,
principally as a result of the increase in current income taxes during fiscal
2002 compared with that of fiscal 2001.

Toyota's total borrowings increased during fiscal 2002 by Y1,440.1 billion, or
27.3%.  Toyota's short-term borrowings consist of loans with a weighted-average
fixed interest rate of 1.44% and commercial paper with a weighted-average fixed
interest rate of 2.19%.  Short-term borrowings increased during fiscal 2002 by
Y356.6 billion, or 24.3%, to Y1,825.6 billion.  Toyota's long-term debt consists
of unsecured and secured loans, medium-term notes, unsecured notes and long-term
capital lease obligations with fixed interest rates ranging from 0.03% to
17.00%, with maturity dates ranging from 2002 to 2032.  Toyota's long-term debt
also consists of unsecured convertible bonds of consolidated subsidiaries and
notes payable related to securitized finance receivables structured as
collateralized borrowings.  The current portion of long-term debt increased
during fiscal 2002 by Y444.1 billion, or 62.1%, to Y1,158.8 billion and the
non-current portion increased by Y639.4 billion, or 20.7%, to Y3,722.7 billion.
These increases reflect borrowings to fund finance receivables, borrowings
included as the result of the consolidation of Hino and the change in foreign
currency translations rates.  At March 31,2002, approximately 47% of long-term
debt was denominated in U.S. dollars, 27% in Japanese yen and 26% in other
currencies.  Toyota hedges fixed rate exposure by entering into interest rate
swaps.  There are no material seasonal variations in Toyota's borrowing
requirements.

As of March 31, 2002, Toyota's total financial debt was 92.3% of total
shareholders' equity, compared to 74.4% as of March 31, 2001.

At March 31, 2002, Toyota had an unfunded pension liability of Y1,141.4 billion
that related primarily to the parent company and its Japanese subsidiaries.  The
unfunded amounts are primarily funded on the retirement date of each covered
employee.  In conjunction with enforcement of the Defined Benefit Pension Plan
Law, the parent company received approval from the Minister of Health, Labor and
Welfare for exemption from the obligation of the future benefit payment
regarding substituted portions of employee pension funds (the parent company
received approval on April 1, 2002). See Note 18 to the  consolidated financial
statements.

Toyota's long-term debt was rated 'AAA' by Standard & Poor's Ratings Group and
'Aa1' by Moody's Investors Services as of March 31, 2002.  These ratings
represent Standard and Poor's highest long-term debt rating and Moody's second
highest rating.  A credit rating is not a recommendation to buy, sell or hold
securities.  A credit rating may be subject to withdrawal or revision at any
time.  Each rating should be evaluated separately of any other rating.

Toyota's treasury policy is to maintain controls on all exposures, to adhere to
stringent counterparty credit standards, and to actively monitor marketplace
exposures.  Toyota centralized and is pursuing global efficiency of its
financial services operations through Toyota Financial Services Corporation.

The key element of Toyota's financial policy is maintaining a strong financial
position that will allow Toyota to fund its research and development
initiatives, capital expenditures and financing operations on a cost effective
basis even if earnings experience short-term fluctuation.  Toyota believes that
it maintains sufficient liquidity for its present requirements and that by
maintaining high credit ratings, it will continue to be able to access funds
from external sources in large amounts and at relatively low costs.  Toyota's
ability to maintain its high credit ratings is subject to a number of factors,
some of which are not in Toyota's control.  These factors include general
economic conditions in Japan and the other major markets in which Toyota does
business, as well as Toyota's successful implementation of its business
strategy.

Off-Balance Sheet Activities

Toyota's securitization program involves selling discrete pools of finance
receivables or interests in lease receivables to wholly-owned bankruptcy remote
Special Purpose Entities ('SPEs'), which in turn sell the receivables to
separate securitization trusts in exchange for the proceeds from securities
issued by the trust. The securities issued by the trust, usually notes or
certificates of various maturities and interest rates, are secured by
collections on the sold receivables. These securities, commonly referred to as
asset-backed securities, are structured into senior and subordinated classes.
Generally, the senior classes have priority over the subordinated classes in
receiving collections from the sold receivables.

As of March 31, 2002, outstanding debt from asset-backed securitizations and
notes payable related to securitized finance receivables structured as
collateralized borrowings totaled approximately Y573.0 billion and Y138.1
billion, respectively.

On any payment date, the priority of payments made from available collections
and amounts withdrawn from existing reserve funds or revolving liquidity notes,
are as follows: servicing fee, noteholder interest, allocation of principal,
reserve fund account deposit, and finally, excess amounts. Therefore, the
interests of noteholders are subordinate to the servicer, but have priority over
any deposits in a reserve fund, any draws against existing revolving liquidity
notes, or any excess amounts. In addition, in most cases, noteholders holding
senior classes of notes are paid prior to any existing subordinate class (some
transactions are structured so that the subordinate tranche is released pro rata
with certain senior tranches).

Toyota may enter into swap agreements with the securitization trusts so that
interest rate exposure remains with Toyota, and not the securitization trusts.
This exposure may or may not be mitigated by other swap arrangements entered
into by Toyota, and this is determined by Toyota's management. The Company's
general exposure every month, is the notional balance of the security multiplied
by the rate differential.  However, in the case of a default by the
securitization trust, the Company's maximum exposure would be the interest due
based on the outstanding notional value of underlying securities paid at the
rate inherent in the swap agreement.

 For the year ended March 31, 2002, the following table summarizes certain cash
flows received from and paid to the securitization trusts:
                                                                     Yen in millions
                                                                    Retail      Leases

Proceeds from new securitizations..............................    Y596,246         Y-
Servicing fees                                                        7,258        675
received...............................................
Excess interest received from interest only strips........           22,438        225
Repurchases of delinquent receivables........................         (187)   (38,893)
Reimbursements of servicer advances........................             862      2,337
Reimbursements of maturity advances.......................                -      8,623


Contractual Obligations and Commitments

For information regarding debt obligations, capital lease obligations, operating
leases, and other obligations, including amounts maturing in each of the next
five years, see note 10, 13, 21 and 22 to the  consolidated financial
statements. In addition, as part of Toyota's normal business practices, Toyota
enters into long-term arrangements with suppliers for purchases of certain raw
materials, components and services. These arrangements may contain fixed/minimum
quantity purchase requirements.  Toyota enters into such arrangements to
facilitate adequate supply of these materials and services.

Related Party Transactions

Toyota does not have any significant related party transactions other than
transactions with affiliated companies in the ordinary course of business.  See
note 12 to the consolidated financial statements.

Legislation Regarding End-of-Life Vehicles

In September 2000, the European Union issued a directive that requires member
states to adopt the following legislation:

•         manufacturers are to be financially responsible for taking back
          end-of-life vehicles put on the market after July 1, 2002 and 
          dismantling and recycling those vehicles.  Beginning January 1, 2007, 
          manufacturers are additionally responsible for vehicles put on the 
          market before July 1, 2002;

•         manufacturers may not use certain hazardous materials in vehicles to
          be sold after July 2003; and

•         95% of parts of vehicles sold as of a specified date to be determined
          in a future directive must be re-usable and recoverable.

In addition, under this directive member states shall take measures to ensure
that car manufacturers, distributors and other auto-related businesses establish
adequate used vehicle disposal facilities and to ensure that hazardous materials
and recyclable parts are removed from vehicles prior to scrapping.  The
directive also imposes requirements on the proportion of vehicles that may be
disposed of in landfills.  Presently, there are uncertainties surrounding the
form and implementation of the legislation in different member states,
especially regarding manufacturers' responsibilities and the resultant expenses
that may be incurred.  The laws developed in the individual local legislatures
throughout the European Union will have a significant impact on the amount
ultimately paid by manufacturers for end-of-life vehicles.  This directive would
impact Toyota's vehicles sold in the European Union.  Toyota is currently
assessing the impact of this future legislation on its results of operations,
cash flows and financial position.

Recent Accounting Pronouncements in the United States

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standard (FAS) No. 141, 'Business Combinations'.  FAS
No. 141 requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001.  This statement specifies that
certain acquired intangible assets in a business combination be recognized as
assets separately from goodwill and that existing intangible assets and goodwill
be evaluated for these new separation requirements.  Management does not expect
this statement to have a material impact on Toyota's consolidated financial
position or results of operations.

In June 2001, the FASB issued FAS No. 142, 'Goodwill and Other Intangible
Assets'. FAS No. 142 changes the accounting for goodwill from an amortization
method to an impairment-only approach.  Amortization of goodwill,
including goodwill recorded in past business combinations, will cease upon
adoption of this statement.  In addition, this statement requires that goodwill
be tested for impairment at least annually at the reporting unit level.  Toyota
adopted FAS No 142 on April 1, 2002.  At March 31, 2002, the amount of
unamortized goodwill is insignificant and management does not expect this
statement to have a material impact on Toyota's consolidated financial position
or results of operations.

In June 2001, the FASB issued FAS No. 143, 'Accounting for Asset Retirement
Obligations'. This statement addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the
associated asset retirement costs.  Toyota is required to implement FAS No. 143
on April 1, 2003.  Management does not expect this statement to have a material
impact on Toyota's consolidated financial position or results of operations.

In August 2001, the FASB issued FAS No. 144, 'Accounting for the Impairment or
Disposal of Long-Lived Assets.'  This statement supersedes FAS No. 121,
'Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of'. The statement retains the previously existing accounting
requirements related to the recognition and measurement of the impairment of
long-lived assets to be held and used while expanding the measurement
requirements of long-lived assets to be disposed of by sale to include
discontinued operations.  It also expands the previously existing reporting
requirements for discontinued operations to include a component of an entity
that either has been disposed of or is classified as held for sale.  Toyota
implemented FAS No. 144 on April 1, 2002.  Management does not expect this
statement to have a material impact on Toyota's consolidated financial position
or results of operations.

Critical Accounting Policies

The consolidated financial statements of Toyota are prepared in conformity with
accounting principles generally accepted in the United States of America. The
preparation of these financial statements requires the use of estimates,
judgments and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the periods presented. Toyota believes that of its
significant accounting policies, the following may involve a higher degree of
judgments, estimates and complexity:

Warranty

Toyota generally warrants its products against certain manufacturing and other
defects.  Product warranties are provided for specific periods of time and/or
usage of the product and vary depending upon the nature of the product, the
geographic location of its sale and other factors.  All product warranties are
consistent with commercial practices. Toyota provides a provision for estimated
product warranty costs as a component of cost of sales at the time the related
sale is recognized. The accrued warranty costs represent management's best
estimate at the time of sale of the total costs that Toyota will incur to repair
or replace product parts that fail while still under warranty. The amount of
accrued estimated warranty costs is primarily based on historical experience as
to product failures as well as current information on repair costs. The amount
of warranty costs accrued also contains an estimate as to warranty claim
recoveries from suppliers. The foregoing evaluations are inherently uncertain,
as they require material estimates and some products' warranty extend for
several years. Consequently, actual warranty costs will differ from the
estimated amounts and could require additional warranty provisions.  If these
factors require a significant increase in Toyota's accrued estimated warranty
costs, it would negatively affect future operating results of the automotive
operations.

Allowance for Doubtful Accounts and Credit Losses

Sales financing and finance lease receivables consist of retail installment
sales contracts secured by passenger cars and commercial vehicles.
Collectibility risks include consumer and dealer insolvencies and insufficient
collateral values (less costs to sell) to realize the full carrying values of
these receivables. As a matter of policy, Toyota maintains an allowance for
doubtful accounts and credit losses representing Toyota's management's estimate
of the amount of asset impairment in the portfolios of finance, trade and other
receivables. Toyota determines the allowance for doubtful accounts and credit
losses based on a systematic, ongoing review and evaluation performed as part of
the credit-risk evaluation process, historical loss experience, the size and
composition of the portfolios, current economic events and conditions, the
estimated fair value and adequacy of collateral and other pertinent factors.
This evaluation is inherently judgmental and requires material estimates,
including the amounts and timing of future cash flows expected to be received,
which may be susceptible to significant change. Although management considers
the allowance for doubtful accounts and credit losses to be adequate based on
information currently available, additional provisions may be necessary due to
(i) changes in management estimates and assumptions about asset impairment, (ii)
information that indicates changes in the expected future cash flows, or (iii)
changes in economic and other events and conditions. A prolonged economic
downturn in North America and Western Europe could increase the likelihood of
credit losses exceeding current estimates. To the extent that sales incentives
remain an integral part of sales promotion with the effect of reducing new
vehicle prices, resale prices of used vehicles and, correspondingly, the
collateral value of Toyota's sales financing and finance lease receivables could
experience further downward pressure. If these factors require a significant
increase in Toyota's allowance for doubtful accounts and credit losses, it could
negatively affect future operating results of the financial services operations.

Investment in Operating Leases

Vehicles on operating leases, where Toyota is the lessor, is valued at
acquisition cost and depreciated over its estimated useful life using the
straight-line method to its estimated residual value. Toyota utilizes industry
published information and its historical experience to determine estimated
residual values for these vehicles. Toyota evaluates the recoverability of the
carrying values of its leased vehicles for impairment when there are indications
of declines in residual values. In recent years, the resale values of returned
vehicles have been depressed, primarily because of an increased supply of used
vehicles in the market that has depressed market prices.  In addition, to the
extent that sales incentives remain an integral part of sales promotion
(reducing new vehicle prices), resale prices of used vehicles and,
correspondingly, the carrying value of Toyota's leased vehicles could be subject
to further downward pressure. If resale prices of used vehicles decline, future
operating results of the financial services operations are likely to be
adversely affected by incremental charges to reduce estimated residual values.

Impairment of Long-Lived Assets

Toyota periodically reviews the carrying value of its long-lived assets held and
used and assets to be disposed of, including goodwill and other intangible
assets, when events and circumstances warrant such a review. This review is
performed using estimates of future cash flows. If the carrying value of a
long-lived asset is considered impaired, an impairment charge is recorded for
the amount by which the carrying value of the long-lived asset exceeds its fair
value. Management believes that the estimates of future cash flows and fair
value are reasonable; however, changes in estimates of such cash flows and fair
value would affect the evaluations and negatively affect future operating
results of the automotive operations

Employee Costs

Pension and other postretirement benefits costs and obligations and
post-employment benefit costs are dependent on assumptions used in calculating
such amounts. These assumptions include discount rates, health care cost trend
rates, benefits earned, interest cost, expected return on plan assets, mortality
rates and other factors. Actual results that differ from the assumptions are
accumulated and amortized over future periods and, therefore, generally affect
recognized expense and the recorded obligation in future periods. While
management believes that the assumptions used are appropriate, differences in
actual experience or changes in assumptions may affect Toyota's pension and
other postretirement costs and obligations and post-employment benefit costs.

Derivatives and Other Contracts at Fair Value

Toyota uses derivatives in the normal course of business to manage its exposure
to foreign currency exchange rates and interest rates. The accounting is complex
and continues to evolve. In addition, there are the significant judgments and
estimates involved in the estimating of fair value in the absence of quoted
market values. These estimates are based upon valuation methodologies deemed
appropriate in the circumstances; however, the use of different assumptions may
have a material effect on the estimated fair value amounts.

Marketable securities

Toyota's accounting policy is to record a write-down of such investments to
realizable value when a decline in fair value below carrying value is other than
temporary. In determining if a decline in value is other than temporary, Toyota
considers the length of time and the extent to which the fair value has been
less than the carrying value, the financial condition and prospects of the
company and Toyota's ability and intent to retain its investment in the company
for a period of time sufficient to allow for any anticipated recovery in market
value.

Quantitative And Qualitative Disclosures About Market Risk

Toyota is exposed to market risk from changes in foreign currency exchange
rates, interest rates and certain commodity and equity security prices.  In
order to manage the risk arising from changes in foreign currency exchange rates
and interest rates, Toyota enters into a variety of derivative financial
instruments.

A description of Toyota's accounting policies for derivative instruments is
included in note 2 to the consolidated financial statements and further
disclosure is provided in note 19 and 20 to the consolidated financial
statements.

Toyota monitors and manages these financial exposures as an integral part of its
overall risk management program, which recognizes the unpredictability of
financial markets and seeks to reduce the potentially adverse effect on Toyota's
operating results.

The financial instruments included in the market risk analysis consist of all of
Toyota's cash and cash equivalents, marketable securities, finance receivables,
securities investments, long-term and short-term debt and all derivative
financial instruments.  Toyota's portfolio of derivative financial instruments
consists of foreign exchange forward contracts, foreign currency options,
interest rate swaps, interest rate currency swaps agreements and interest rate
options. Anticipated transactions denominated in foreign currencies that are
covered by Toyota's derivative hedging are not included in the market risk
analysis.  Although operating leases are not required to be included, Toyota has
included these instruments in determining interest rate risk.

Foreign Currency Exchange Rate Risk

Toyota has foreign currency exposures related to buying, selling and financing
in currencies other than the local currencies in which it operates.  Toyota is
exposed to foreign currency risk related to future earnings or assets and
liabilities that are exposed due to operating cash flows and various financial
instruments that are denominated in foreign currencies.  Toyota's most
significant foreign currency exposures relate to the United States and Western
European countries.

Toyota uses a value-at-risk analysis ('VAR') to evaluate its exposure to changes
in foreign currency exchange rates.  The value-at-risk of the combined foreign
exchange position represents a potential loss in pre-tax earnings that are
estimated to be Y25.2 billion as of March 31, 2001 and Y24.0 billion as of March
31, 2002.  Based on Toyota's overall currency exposure (including derivative
positions), the risk during the year ended March 31, 2002 to pre-tax cash flow
from currency movements was on average Y25.0 billion, with a high of Y26.7
billion and a low of Y22.9 billion.

The value-at-risk was estimated by using a variance/covariance model and assumed
a 95% confidence level on the realization date and a 10-day holding period.
Toyota changed the model used for calculation of value-at-risk from 'variance/
covariance' method to 'Monte Carlo Simulation' method because Toyota introduced
a new system which Toyota considers more effective for risk management purposes.
The prior year amounts have been restated to the fiscal 2002 presentation.

Interest Rate Risk

Toyota is subject to market risk from exposure to changes in interest rates
based on its financing, investing and cash management activities.  Toyota enters
into various financial instrument transactions to maintain the desired level of
exposure to the risk of interest rate fluctuations and to minimize interest
expense.  Certain exchange traded future and option contracts, interest rate
caps and floors, along with various investments, have been entered into to
reduce the interest rate risk related to these activities.  The potential
decrease in fair value resulting from a hypothetical 100 basis point upward
shift in interest rates would be approximately Y38.3 billion as of March 31,
2001 and Y28.3 billion as of March 31, 2002.

There are certain shortcomings inherent to the sensitivity analyses presented.
The model assumes interest rate changes are instantaneous parallel shifts in the
yield curve; however, in reality, changes are rarely instantaneous.  Although
certain assets and liabilities may have similar maturities or periods to
repricing, they may not react correspondingly to changes in market interest
rates.  Also, the interest rates on certain types of assets and liabilities may
fluctuate with changes in market interest rates, while interest rates on other
types of assets may lag behind changes in market rates.  Finance receivables are
less susceptible to prepayments when interest rates change and, as a result,
Toyota's model does not address prepayment risk for automotive related finance
receivables.  However, in the event of a change in interest rates, actual loan
prepayments may deviate significantly from assumptions used in the model.

Commodity Price Risk

Commodity price risk is the possibility of higher or lower costs due to changes
in the prices of commodities, such as non-ferrous (e.g., aluminum), precious
metals (e.g., palladium, platinum and rhodium) and ferrous alloys (e.g., steel),
which Toyota uses in the production of motor vehicles. Toyota does not use
derivative instruments to hedge the price risk associated with the purchase of
those commodities and controls its commodity price risk by holding minimum stock
levels.

Equity Price Risk

Toyota holds investments in various available-for-sale securities which are
subject to price risk.  The fair value of available-for-sale securities was
approximately Y718.6 billion as of March 31, 2001 and the fair value of
available-for-sale equity securities was approximately Y564.4 billion as of
March 31, 2002.  The potential change in the fair value of these investments,
assuming a 10% change in prices, would be approximately Y71.9 billion as of
March 31, 2001 and Y56.4 billion as of March 31, 2002.






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