The company, which is Japan's largest consumer electronics manufacturer, now expects net profit for the year to be ¥30 billion (US$315 million), down sharply from the previously forecast profit of ¥310 billion. Sales are expected to be ¥8.5 trillion, revised down from ¥9.2 trillion.

"The current financial crisis originated in the U.S. has spread across the world and the business sentiment in Japan and overseas has significantly worsened," Panasonic said in a statement. "Under these circumstances, the company’s business conditions are deteriorating sharply, due mainly to the rapid appreciation of the yen, sluggish consumer spending and ever-intensified price competition."

With the revised targets Panasonic is forecasting a contraction of its business this year compared to last year. If attained the new forecasts will mean a drop in sales of 6.6 percent a drop in net profits of 89 percent from last year.