* Q2 operating profit falls 72 pct on firmer yen, slow sales
* No clear recovery in sight for office equipment
* Raises full year operating outlook 6 pct to 190 bln yen
* Shares down 0.3 pct before result vs 1 pct fall in sector
* Earnings underscore relatively solid business model-analyst (Adds details)
By Kiyoshi Takenaka and Nathan Layne
TOKYO, July 28 (Reuters) - Japan's Canon Inc nudged up its profit outlook as it steps up cost cuts, but maintained a cautious view on office equipment demand, boding ill for Ricoh Co Ltd and other copier and printer makers.
Canon posted a 72 percent fall in quarterly operating profit on Tuesday, hit by sluggish demand for office machines, but raised its full-year forecast by 6 percent to reflect more aggressive restructuring steps and a softer-than-expected yen.
The world's largest digital camera maker has benefited from solid demand for high-end cameras, helping cushion the blow from weak sales of copiers and printers as companies worldwide rein in spending on office machines in a tough economic environment.
"We believe governments' stimulus measures will be starting to bear fruit from now on, but it's not very easy to talk about a recovery in the office equipment sector at this stage," Canon Managing Director Masahiro Osawa told a news conference.
Canon now expects an annual operating profit of 190 billion yen ($2 billion), higher than the consensus estimate for a 174 billion yen profit in a poll of 18 analysts by Thomson Reuters, but down 62 percent from 2008.
It expects unit sales of its cash cow laser beam printers in 2009 to fall 45 percent from 2008.
The maker of EOS and IXY brand digital cameras also said it now aims to cut 220 billion yen in costs this year, a 28 percent increase on its previous target of 172 billion yen.
HIGH-END CAMERA SHINES
In contrast with sluggish demand for office machines, Canon enjoyed robust demand for single lens reflex (SLR) cameras, high-end models with interchangeable lenses, as the introduction of lighter and cheaper entry versions prompts users to shift from compact cameras to SLRs.
Canon, which competes with smaller rivals such as Sony Corp and Nikon Corp in the digital camera market, raised its digital SLR camera sales target for 2009 by 3 percent to 4 million cameras.
"The results confirm that the company is able to offset the deterioration of the copier and printer business with its consumer businesses, namely digital cameras," said J.P. Morgan analyst Hisashi Moriyama.
"Canon's profit structure is different than that of a pure office equipment maker."
Canon's results come after rival Xerox Corp beat quarterly profit estimates last week, helped by cost cuts, but cautioned that a slowdown in office equipment spending would pinch revenue for the remainder of the year.
Canon competes with Xerox, Ricoh Co Ltd and Konica Minolta Holdings Inc in copiers and printers.
Ricoh is set to report its quarterly results on Friday, followed by Konica Minolta on Aug. 6.
Canon's operating profit was 44.91 billion yen in April-June, down from 160.15 billion yen a year earlier but up from a 20 billion yen profit in the previous quarter, a sign that its quarterly earnings may have bottomed out.
Canon reported a quarter-on-quarter decline in operating profit for five consecutive quarters to January-March.
It revised its assumption for the euro/yen rate to a more favourable 130 yen from 125 yen for the second half, while leaving its dollar/yen assumption at 95 yen.
It said it would pay a first-half dividend of 55 yen per share, unchanged from a year earlier.
Prior to the announcement, shares in Canon closed down 0.3 percent at 3,370 yen, outperforming the Tokyo stock market's electrical machinery index, which fell 1 percent.
By Monday, Canon shares had risen 20 percent since April versus a 28 percent rise in the subindex. ($1=95.00 Yen) (Editing by Michael Watson)