* What: Toyota, Honda, Nissan, Hyundai July-Sept earnings
* When: Oct 22-Nov 5
* Top Japan automakers seen lifting forecasts
* Hyundai Q3 net seen more than doubling but won a worry
* End of govt sales incentives a risk next year
By Chang-Ran Kim and Cheon Jong-woo
TOKYO/SEOUL, Oct 21 (Reuters) - Top Japanese and Korean carmakers are seen reporting improved quarterly earnings as government incentives fuelled unforeseen demand, but sharp currency swings remain a risk for the big exporters.
For Toyota Motor Corp, Honda Motor Co and Nissan Motor Co, July-September earnings will be far weaker than a year ago when the collapse of Lehman Brothers deepened the global financial crisis. But results will mark a big improvement from the prior quarter when demand was weak and production was being cut, analysts said.
"With automakers aggressively cutting costs and auto demand in industrialised markets rebounding sharply thanks to incentives, we look for the recovery in automakers' profits to accelerate in the second quarter," JPMorgan Securities analyst Kohei Takahashi wrote in a report.
Takahashi said that inventory shortages in some markets would likely continue to drive production higher through the financial year to March in Japan.
Japan's top three automakers have also already factored in a full-year dollar-yen rate in the low 90s, leaving room for upward revisions in their annual forecasts. The dollar fell to as low as 88 yen earlier this month from above 97 yen in August, but has since rebounded, helping improve earnings from the key U.S. market.
European and U.S. automakers are also seeing some signs of improvement after one of industry's worst ever periods drove both General Motors and Chrysler to bankruptcy.
TOYOTA LOSS LOOMS
Toyota is expected to be the only top Japanese automaker to post a quarterly loss as it struggles to reverse a big jump in production capacity it added when sales were booming before the crisis hit.
Analysts expect the loss to disappear in the second half as production and sales improve.
"We regard yen appreciation as a risk, but expect Toyota's results announcement to be accompanied by an upward revision to guidance, and to confirm the groundwork is being laid for profits in the second half and and earnings expansion next year," Nomura Securities auto analyst Shotaro Noguchi said.
Toyota, the world's biggest automaker, has forecast an operating loss of 750 billion yen ($8.3 billion) for the year to March, almost three times the average projection of a 269 billion yen loss in a survey of 20 analysts by Thomson Reuters I/B/E/S.
For the latest quarter, consensus estimates put Toyota's operating loss at 63 billion yen, a far cry from the profit of 169.5 billion yen a year ago but a vast improvement from the 195 billion yen loss in the first quarter.
Toyota has particularly benefited in Japan from the government's generous incentives and tax breaks on hybrid cars, keeping its Prius sedan at the top of domestic sales rankings since June.
Honda and Nissan are also seen faring better, with both expected to report second-quarter operating profits of more than 30 billion yen, in Nissan's case, partly driven by better-than-anticipated growth in China.
The U.S. government's cash-for-clunkers scheme also helped Asian automakers grab a bigger share of the world's second-largest car market in the past quarter, although the effect proved short-lived with sales slumping in September.
HYUNDAI BLAZES PAST
The biggest winner from the scrappage schemes, from the United States to Europe, has been South Korea's Hyundai Motor Co, which attracted customers with new models such as the revamped Sonata mid-sized sedan, clever marketing tools and competitively priced cars compared with Japanese rivals.
South Korea's top automaker is expected to more than double its quarterly profit from the year before, when unionised workers staged a strike and slammed the brakes on production.
Hyundai affiliate Kia Motors Corp is also seen swinging to a net profit in the July-September third quarter on higher sales fueled by new models.
But analysts cautioned that the rising won could reduce their ability to offer attractive deals going forward and potentially rein in sales growth further out.
"Hyundai is expected to keep outpacing rivals, especially Japanese makers," said Lee Sok-je, an analyst at Mirae Asset Securities. "But I am really worried about the next year given the firmer won as well as the end of governments' (stimulus) measures."
The won gained 8.1 percent against the dollar in the three months ended Sept. 30, after an 8.6 percent jump in the previous quarter.
Hyundai is due to report third-quarter results on Thursday, followed by Honda on Oct 27, Nissan on Nov 4 and Toyota on Nov 5. ($1=90.64 Yen=1167.0 Won) (Editing by Lincoln Feast)