UPDATE 6-Toyota in surprise Q2 profit, outlook bumpy

* Q2 operating profit Y58 bln vs consensus Y63 bln loss

* Sees FY operating loss Y350 bln instead of Y750 bln loss

* Cost cuts seen as key as government stimuli run out

* Toyota's U.S. shares rise 1.4 pct (Adds U.S. share move)

By Chang-Ran Kim, Asia autos correspondent

TOKYO, Nov 5 (Reuters) - Toyota Motor Corp's surprise quarterly profit and halving of its annual loss forecast failed to convince investors the world's No.1 carmaker is back on track, as government subsidies peter out and a strong yen takes its toll.

Major Japanese automakers have raised their forecasts for the year to March 2010 as they squeeze out savings and government incentives from Germany to China, the U.S. and Japan prop demand through the worst economic crisis in generations.

But with such stimulus programmes beginning to run out, Toyota (7203.T) is looking to eliminate more spending, announcing its exit from Formula One racing on Wednesday to put that annual budget of around $300 million to better use. [ID:nT151120]

"The biggest challenge for Toyota now is cutting overheads," said Koji Endo, a senior analyst at Advanced Research Japan in Tokyo.