(Corrects dateline to Oct 27)
* Q3 operating profit falls 21 pct to 71.8 bln yen
* Steep fall had been flagged by Nikkei business daily
* Investments in new businesses also weighed on profit
* Full-year earnings forecast lifted on weaker yen
By Sophie Knight
TOKYO, Oct 27 (Reuters) - Japan’s Canon Inc said quarterly operating profit fell by a fifth as demand for digital cameras slumped and it spent more on developing new businesses, but it nudged up its full-year earnings estimates on a sharply weaker yen.
The consumer shift to smartphones for casual photo taking has pummelled demand for compact cameras, while the growing popularity of lighter mirrorless cameras has taken away market share from higher margin single-lens reflex cameras.
Operating profit for the July-September quarter came in at 71.8 billion yen ($665 million), not far off figures flagged by the Nikkei business daily earlier this month.
Investments to boost businesses such as video surveillance and semiconductor steppers also helped to outweigh a 11.4 billion yen contribution from a weaker yen, a company spokesman said.
Revenue fell 4.5 percent to 872.2 billion yen.
The export-reliant company lifted its operating profit forecast but it acknowledged that but for the weaker yen, it would have revised down.
It now expects 370 billion yen for the year to end December, up from a prior prediction of 365 billion yen and a 9.7 percent increase on the previous year.
While a softer yen boosts earnings for export-oriented companies, the Japanese currency’s rapid descent against the greenback - around 8 percent over the July-September period - has driven up import costs and prompted complaints from Japan Inc that yen weakness has gone far enough.
“It’s difficult to give an ideal level but if it stopped at its current level it wouldn’t be a bad thing,” said Chief Financial Officer Toshizo Tanaka.
Japan’s currency is trading at around 108 yen to the dollar after having weakened to as low as 110 yen at the beginning of this month. A Reuters Corporate Survey showed in September that only one quarter of Japanese firms preferred an exchange rate of 105 yen or weaker.
Canon’s shares closed up 0.8 percent on Monday ahead of results. (1 US dollar = 107.9600 Japanese yen) (Reporting by Sophie Knight; Editing by Edwina Gibbs)