updated 10/15/2008 2:55:32 AM ET 2008-10-15T06:55:32

TOKYO (Reuters) - The president of Toyota Motor Corp <7203.T> said the business environment has deteriorated beyond earlier expectations and predicted the key North American car market would remain sluggish through next year.

Katsuaki Watanabe told reporters that he was worried the financial market turmoil originating in the United States was starting to impact economies worldwide. Demand in emerging markets has been slower than expected, he said.

"In the past week, what started in the U.S. spread across the world," Watanabe said.

A company source told Reuters last week that the world's largest automaker was considering what would be a rare downward revision of its earnings outlook because of sluggish global demand and a firmer yen.

Watanabe said that the business environment had worsened beyond expectations when the company announced first quarter earnings two months ago, but that it was still assessing the impact.

Watanabe said that Toyota now expects conditions in the U.S. market to remain tough throughout 2009, instead of recovering from spring of next year as originally thought.

"I think things will be tough through all of next year," he said.

(Reporting by Yumiko Nishitani; Editing by Hugh Lawson)

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