The company said it lost $698m (£418m)in the six months to September, far more than the expected $137m.

It added that it now expects to lose $100m for the year as a whole, against earlier forecasts of a $90m profit.

The company's woes reflect mounting unpaid loans by US car buyers, competitive market conditions, and the impact of a weaker dollar.

Sour loans have forced the company to start focusing on better-off customers in the US, a move which has dented its overall sales.

Shares slide

Investors reacted with dismay, marking Mitsubishi shares down more than 6% to 228 yen, their lowest level in a year.

Koji Endo, a senior analyst at Credit Suisse First Boston, described the results as "disastrous."

"We doubt if the company can meet its revised full-year earnings target," he said.

Mitsubishi, Japan's fourth biggest car maker, held out little hope of an immediate turnaround.

"Prospects for the global economy remain obscure under the unstable currency movement, and despite some signs of recovery in the US," it said in a statement.

"In Japan, personal consumption is expected to remain sluggish, making further intensified competition in the market unavoidable."