Tokyo - Canon Inc has shelved plans to build a new 196-million-dollar plant for digital still cameras due to plunging demand, the Japanese electronics company said Wednesday.

Construction work for Canon's third plant, with a production capacity of 4 million units, was scheduled to start in January near Nagasaki in western Japan.

Canon originally predicted strong demand, but was forced to cut sales forecasts by 5 per cent to 27.9 million units in October due to demand falling amid the global financial crisis.

Market conditions would determine when work on the new plant would go ahead, the world's largest maker of digital cameras said. But for the time being, Canon expects the downturn to continue.

Canon said it plans to go ahead with hiring 360 university graduates but, like many other Japanese companies, it is laying off temporary workers.

After years of changing employment structures, every third Japanese employee is now on a temporary contract. The growing wave of layoffs is meeting with increasing criticism in the country.

In an attempt to support the laid-off workers, authorities in Oita prefecture hired 43 temporary workers made redundant by Canon or Toshiba for between two and 12 months.

They were paid a daily wage of approximately 78 dollars, the prefecture said. Similar measures were taken by Kitsui, a city in Oita. Those who lost their homes along with their jobs, can find shelter in municipal housing facilities. (dpa)