Canon has shelved plans to start construction in January of a new digital still camera plant in Japan due to a rapid market decline, it said Wednesday.

The company said in July it would expand production of compact and digital SLR (single lens reflex) cameras with a plant in Nagasaki in western Japan. The factory was to produce around 4 million cameras per year and represented a two-year investment of ¥17.4 billion (US$196 million). Construction was due to begin next month and operations were supposed to start in December 2009 however those plans are now on hold.

"Growth in demand for digital cameras has rapidly declined compared with original projections due to the global economic downturn," the company said in a statement. "This serious drop in demand is expected to continue for a period of time. These factors led to the company’s decision to delay the start of construction and operation of the new manufacturing site."

Canon said it will re-evaluate plans for the factory based on market developers and announce a revised schedule once new timing has been decided.

The domestic digital camera market has turned particularly weak.

Shipments of digital cameras in Japan in October totaled 727,347 units, down 19 percent on the same month the previous year, according to the Japan Camera Industry Association. Domestic shipments in the first ten months of the year came to 9 million units, which is 2 percent higher than the same period in 2007.