Toyota Motor Corp. is facing a Japan problem.

The company, based in Toyota City, Japan, was outsold by General Motors Co. for the first time in six quarters, as deliveries in Japan extended their decline after government incentives for fuel-efficient models expired last year.

Toyota and its subsidiaries sold 2.48 million vehicles during the quarter ended June, just shy of the 2.49 million that Detroit-based GM disclosed earlier this month. Japan’s largest automaker sold 8.4 percent fewer vehicles in its home market last quarter.

Toyota’s decline in Japan car sales shows a rare weak spot for a company that’s forecasting its biggest profit in six years and whose stock has gained 54 percent this year. Japanese vehicle sales have fallen steadily since the asset bubble burst in 1989, with temporary boosts from government subsidies.

“The decline in Japan will continue,” said Jun Nokuo, an analyst with researcher R.L. Polk & Co. in Tokyo. “It is an aging society and the population is shrinking. At the same time, the popularity of cars is declining because public transportation is easy to use.”

Toyota’s sales in the first six months of this year dropped 1.2 percent to 4.91 million units. GM sold 4.85 million vehicles in the first half and Volkswagen delivered 4.7 million, according to the companies.

10 Million

Toyota has been projecting since late December that sales will climb to almost 10 million units, a milestone no automaker has ever breached, in 2013.

Japan’s largest manufacturer has an ever bigger buffer in the yen, whose decline has been bolstering the value of Japanese exports. Toyota, which reports earnings on Aug. 2, probably saw profit last quarter surge 48 percent to the highest in more than five years, according to the average analyst estimate compiled by Bloomberg.

The yen has weakened more than 12 percent against the dollar this year and this week traded at 100 versus the greenback. The Japanese currency may weaken to 105 in the fourth quarter, according to the median of estimates compiled by Bloomberg.

Separately, Toyota said July 26 it will further expand its Princeton, Indiana, auto-assembly plant, investing $30 million to boost Highlander sport-utility vehicle production by a further 15,000 units a year from 2014. The plant will also hire 200 more workers, said Carri Chandler, a spokeswoman said.

Price Cuts

Nissan Motor Co., which yesterday reported a 14 percent increase in profit, has taken advantage of favorable exchange rates by cutting prices of seven models in the U.S., including its top-selling Altima sedan. Nissan, Japan’s second-largest carmaker, saw deliveries surge 20 percent last quarter.

Toyota has resisted following Nissan’s price cuts and saw its sales in the country rise by 3.7 percent, less than half the pace of the industry, and its U.S. market share fell to the lowest in five quarters, according to data compiled by Bloomberg.

At GM, 18 new or refreshed vehicles are being brought into showrooms this year, transforming its lineup into one of the market’s newest from one of the oldest. One of the earliest new offerings, the 2014 Impala, was rated by Consumer Reports as the best sedan on the market, a first for a GM U.S. automaker in at least 20 years.

The product push is part of Chief Executive Officer Dan Akerson’s efforts to boost North American profit margins to 10 percent, stem European losses and increase China sales to 5 million, all by mid-decade.

GM’s rise to the top of the global industry caps a week in which the maker of Chevrolet cars and Ford Motor Co. posted earnings that beat analyst estimates.

China Market

In China, where a territorial dispute led to a consumer backlash that cut demand for Japanese products last year, Toyota continued to lose market share to GM and Volkswagen. Toyota’s deliveries climbed 0.6 percent last quarter, versus GM’s 12 percent and Volkswagen’s 16 percent, according to figures reported by the companies.

Demand for Japanese products in China, the world’s largest auto market, is recovering from last year and Toyota is targeting this year’s deliveries to rise to at least 900,000 units, up about 7 percent from 2012.

In Europe, where auto demand is slumping to its lowest level in two decades, sales of Toyota and Lexus cars last quarter were little changed from a year earlier, reaching 215,734 units. That helped the company keep its market share at about 4.5 percent, according to the company.

Toyota, GM

In 2008, Toyota ended GM’s 77-year reign as the world’s largest automaker, holding on to the top annual sales spot until 2011, when it surrendered the title after production was disrupted by natural disasters in Japan and Thailand. Sales rebounded in 2012, allowing the Japanese automaker to deliver 9.75 million units and regain its global No. 1 title as the recession receded, while the carmaker added products and was spared from disruptions from natural disasters.

“The fight between GM, Toyota and VW will be long and hard fought,” said Alec Gutierrez, senior analyst at Kelley Blue Book. “It will be the manufacturer that is best able to deliver high quality, affordable, fuel-efficient transportation to the masses that will ultimately own the global sales race.”