FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934

For the month of                     July                    ,      2006     

CANON INC.

(Translation of registrant’s name into English)

30-2, Shimomaruko 3-Chome, Ohta-ku, Tokyo 146-8501, Japan

(Address of principal executive offices)

     [Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F þ                              Form 40-F o

     [Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o                                        No þ

     [If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82-__________

 

 

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

The following material is included.

1.		Results For The Second Quarter And The First Half Ended June 30, 2006
2.		Notice regarding revision of projected dividend for the fiscal year ending December 31, 2006 (the 106th Business Term)

RESULTS FOR THE SECOND QUARTER
AND THE FIRST HALF ENDED JUNE 30, 2006

July 27, 2006

CONSOLIDATED RESULTS FOR THE FIRST HALF

		(Millions of yen, thousands of U.S. dollars, except per share amounts)
		Actual																				Projected
		Six months				Six months								Six months				Year ended				Year ending
		ended				ended								ended				December 31,				December 31,
		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				2005				2006				Change(%)
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		¥	1,952,255			¥	1,755,840			+	11.2			$	16,976,130			¥	3,754,191			¥	4,130,000			+	10.0
Operating profit			338,477				270,189			+	25.3				2,943,278				583,043				690,000			+	18.3
Income before income taxes and minority interests			341,045				283,733			+	20.2				2,965,609				612,004				700,000			+	14.4
Net income		¥	214,174			¥	175,268			+	22.2			$	1,862,383			¥	384,096			¥	440,000			+	14.6
Net income per share:
— Basic		¥	160.85			¥	131.74			+	22.1			$	1.40			¥	288.63			¥	330.43			+	14.5
— Diluted			160.79				131.59			+	22.2				1.40				288.36				—				—
		Actual
		As of				As of								As of				As of
		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				December 31, 2005
		(Unaudited)				(Unaudited)								(Unaudited)
Total assets		¥	4,107,366			¥	3,657,425			+	12.3			$	35,716,226			¥	4,043,553
Stockholders’ equity		¥	2,762,380			¥	2,363,970			+	16.9			$	24,020,696			¥	2,604,682

Notes:	1.	Canon’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.
	2.	U.S. dollar amounts are translated from yen at the rate of JPY115=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of June 30, 2006, solely for the convenience of the reader.
	3.	Based on the resolution of Board of Director’s meeting held on May 11, 2006, Canon has made a 3- for -2 stock split on July 1, 2006, for shareholders recorded in the shareholder’s register as of June 30, 2006. The basic net income per share, diluted net income per share, and projected net income per share has been calculated based on the number of outstanding shares following the implementation of the stock split.

NON-CONSOLIDATED RESULTS FOR THE FIRST HALF

		(Millions of yen, thousands of U.S. dollars, except per share amounts)
		Actual																				Projected
		Six months				Six months								Six months				Year ended				Year ending
		ended				ended								ended				December 31,				December 31,
		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				2005				2006				Change(%)
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		¥	1,266,000			¥	1,158,478			+	9.3			$	11,008,696			¥	2,481,481			¥	2,700,000			+	8.8
Operating profit			240,422				192,147			+	25.1				2,090,626				416,517				493,000			+	18.4
Ordinary profit			246,101				210,125			+	17.1				2,140,009				440,711				500,000			+	13.5
Net income		¥	155,548			¥	137,938			+	12.8			$	1,352,591			¥	289,294			¥	316,000			+	9.2
Net income per share		¥	175.23			¥	155.52			+	12.7			$	1.52			¥	325.83			¥	237.31				—
Dividend per share			50.00				32.50				—				0.43				100.00				83.33				—
		Actual
		As of				As of								As of				As of
		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				December 31, 2005
		(Unaudited)				(Unaudited)								(Unaudited)
Total assets		¥	2,673,501			¥	2,427,971			+	10.1			$	23,247,835			¥	2,652,847
Net assets		¥	1,970,766			¥	1,753,383			+	12.4			$	17,137,096			¥	1,875,433

Notes:	1.	U.S. dollar amounts are translated from yen at the rate of JPY115=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of June 30, 2006, solely for the convenience of the reader.
	2.	Based on the resolution of Board of Director’s meeting held on May 11, 2006, Canon has made a 3- for -2 stock split on July 1, 2006, for shareholders recorded in the shareholder’s register as of June 30, 2006. The projected net income per share has been calculated based on the number of outstanding shares following the implementation of the stock split. The per share information assuming that the stock split was exercised on the beginning of the last year are as follows:

		Six months ended				Six months ended				Year ended
		June 30, 2006				June 30, 2005				December 31, 2005
Net income per share		¥	116.82			¥	103.68			¥	217.22
Dividend per share			33.33				21.67				66.67

Canon Inc. Headquarter office		30-2, Shimomaruko 3-chome, Ohta-ku, Tokyo 146-8501, Japan

Management Policy

Basic Policy

Under the corporate philosophy of kyosei—living and working together for the common good—Canon’s basic management policy is to contribute to the prosperity and well-being of the world while endeavoring to become a truly excellent global corporate group targeting continued growth and development.

Management goals

     Based on this basic management policy, Canon Inc. launched two consecutive five-year management plans—Phase I of its Excellent Global Corporation Plan in 1996 and Phase II in 2001— with the aim of becoming a truly excellent global company. Through these two five-year management plans, the company promoted a range of management reforms, thoroughly strengthening its product competitiveness and financial base. From 2006, Canon will make use of the solid management foundation achieved through the two five-year plans as the company initiates Phase III, a new five-year management initiative, targeting further growth and improved corporate value, pursuing sound growth by maintaining a high level of profitability while further expanding the company’s corporate scale. In particular, the company will focus on the following five important management objectives.

1)		Achieving the overwhelming No. 1 position worldwide in all current core businesses, and firmly establishing three display technologies as businesses
2)		Establishing new production systems to sustain international competitiveness
3)		Expanding business operations and establishing a Three Regional Headquarters System through diversification
4)		Identifying new business domains and accumulating required technologies
5)		Nurturing truly autonomous and strong individuals promoting everlasting corporate reforms

Mid- to long-term management strategies

     In order to realize the above objectives, we will implement the following mid- to long-term management strategies:

1)

Achieving the overwhelming No. 1 position worldwide in all current core businesses

     In order to realize our objective of obtaining the No. 1 market share position for all of our core products, Canon will focus on thoroughly enhancing each business’s product development capabilities and product price competitiveness. Furthermore, in order to realize our objective of becoming No. 1 in each of our businesses, we will carry out the following measures.

     As for copying machines and laser beam printers, amid growing demand for color output in the office, we have applied Canon proprietary technology to actively launch competitive new products that are differentiated by their outstanding performance capabilities to expand our market share. Furthermore, we will take advantage of changes in the office network environment due to the spread of broadband networks and aim to get a jump on the competition with the development of a new-concept multifunction device that maximizes the functionality of each device connected to a network. Also, to satisfy the various needs of our customers, we will actively expand our document solutions business through the use of our platform architecture, which makes possible expanded functionality, and by supplying software and services. Furthermore, going forward, we aim to launch products with improved price competitiveness in emerging markets, which are expected to grow significantly, capitalizing on underlying demand to raise our market share.

     With regard to inkjet printers, we aim to expand our market share by utilizing Canon-developed high-precision inkjet print heads, which offer a competitive advantage in printing high-quality photo images, and strengthening our lineup of multifunction products, which have become a core segment of the market.

     In the digital camera segment, through the timely launch of competitive products that capitalize on our expertise in optical and image-processing technologies, we will further solidify our top market share position. Especially in the expanding market for digital SLR cameras, we aim to further expand our market share by taking advantage of our strong product lineup, spanning the range from professional to entry-level models, along with strengthening such proprietary imaging technologies as CMOS image sensors and the

DIGIC digital imaging engine, which support the differentiation of Canon products.

     As for compact digital cameras, which continue to drop in price, we aim to increase our market share by continuously launching competitive new models in a timely manner while also further strengthening our cost competitiveness through an integrated production system that tightly links all stages of production, from parts manufacturing through to final assembly.

     Furthermore, by taking advantage of our strengths in photo printers and digital cameras, we aim to become No. 1 worldwide in the home photo-printing market.

     With regard to IC steppers, we will raise our competitiveness in the market by concentrating on the early development of lithography equipment that employs such leading-edge technologies as liquid immersion technology. As for LCD aligners, a market in which Canon has already secured the No. 1 market share position, we aim to strengthen the development of next-generation models to further solidify our position in the future.

2)

Enhancing cost competitiveness

     Amid intensified price competition in the marketplace, we will continue our efforts to strengthen cost competitiveness in order to raise the price competitiveness of our products. In addition to further advancing the various reform initiatives that we have carried out until now—including production reform activities, centered on the cell production system, and “prototype-less” development, in which every effort has been made to eliminate the need for physical prototypes in the product-development process—we will strive to realize a “three-in-one” foundation for manufacturing that organically integrates development, manufacturing technology, and the factory floor. Plans also call for the introduction of automated production lines using automated assembly systems and robots that operate around the clock, seven days a week, making possible production in Japan at costs that are competitive with production elsewhere in Asia. To realize this goal, we are planning the construction of a new production-engineering center to speed up the strengthening of our production technology capabilities. In addition, we will focus our energies on in-house production, ranging from key devices to various manufacturing equipment and metal molds, and on efforts to improve procurement efficiency of the Canon Group. By thoroughly carrying out these cost-reduction activities we will strive to further lower our cost of sales ratio.

3)

Further enhancing technological strength, a source of profit and growth

     For a company to continue growing while maintaining profitability, it is essential to make the most of growth areas and increase competitiveness in such areas. To this end, last year we completed the construction of a leading-edge technology research center at our Shimomaruko headquarters in Tokyo to actively promote the creation of next-generation business domains and develop leading-edge technologies. We are also working to move ahead of the competition in the development of leading-edge technologies by pursuing partnerships with the world’s top research facilities and universities.

     To improve product competitiveness within existing business segments, we are also focusing our efforts on the development of key components and key devices. At the same time, we are working to further bolster base development technologies in the areas of measurement, analysis and simulation with the aim of further shortening development lead times and reducing the number of product prototypes through the realization of “prototype-less” development processes.

     In addition to the three management strategies outlined above, we will also promote group diversification and strive to create new independent businesses with manufacturing subsidiaries at the core.

     By steadily implementing these management strategies, we are working to further enhance growth and profitability for the Canon Group and link this to improved corporate value.

Business challenges and countermeasures

     At Canon, the creation of new businesses and maintaining our high profitability structure represent two very important management objectives to ensure continuous future growth. As for new businesses, we will promote research into leading-edge technologies in such areas of expertise as biotechnology, nanotechnology and life sciences. Also, to establish new business segments, we will take advantage of M&A opportunities and business tie-ups. Furthermore, we aim to enter the display business, moving away from a focus on still images as we strengthen our ability to deliver video images, which will play an increasingly important role in the broadband era. In this area, we are accelerating our development efforts for our new large-screen flat panel SEDs (Surface-conduction Electron-emitter Displays) toward full-scale

commercialization. With this objective in mind, we established a joint venture company for the development and production of SED panels with Toshiba in October 2004.

     With regard to maintaining our high profitability structure, in order to effectively respond to the intensifying price competition centered on the consumer goods market and the investment burden that accompanies the launch of new businesses, we believe that it is important to further improve the profit-earning ability of our current businesses. To facilitate this, we will promote the development of new competitive products and actively pursue cost-reduction activities.

     We also view our approach to the environment as an important management issue which we need to deal with at the corporate level. From the product development stage through to production, sales, use, recovery, and recycling, we focus our energies on creating environmentally conscious products that realize energy efficiency, resource efficiency, and eliminate the use of hazardous substances. Additionally, we actively promote the development of recycling systems, the expansion of green procurement policies, the disclosure of environmental information, and participation in environmental conservation activities at the community level. Through these kinds of activities, we aim to simultaneously pursue environmental preservation and corporate development.

Basic policy regarding share trading unit

     Canon maintains a basic policy of regularly reviewing its share trading unit from the standpoint of enhancing liquidity and stimulating broader investor participation.

     In view of this policy, the company changed the number of shares that constitute one trading unit from 1,000 to 100, effective May 6, 2004. Furthermore, the company initiated a 3-for-2 forward stock split with a Record Date of June 30, 2006, making its shares even more accessible to a broader range of potential shareholders.

Basic policy regarding profit distribution

     With regard to returning profits to shareholders, Canon actively works to do so mainly through the distribution of dividends, taking into consideration planned future investments, free cash flow, and the company’s consolidated business performance.

     Specifically, the medium- to long-term objective will be to continuously strive to raise the consolidated payout ratio to around 30 percent.

     In accordance with this policy, Canon raised its full-year per-share dividend from 65 yen in 2004, to 100 yen in 2005. And for the period ending December 2006, to further enhance shareholder return, in addition to the interim dividend of 50 yen, Canon plans to pay a year-end dividend of 50 yen (post stock-split basis). Calculated on a pre-stock-split basis, the year-end dividend per share would be 75 yen per share, equivalent to a full-year dividend increase of 25 yen per share.

     With regard to dividends from and after the fiscal year ending December 2007, we will review related policies, including the policy-making body and payout frequency.

Matters regarding the parent company, etc.

     Canon Inc. does not have a parent company.

Operating Results and Financial Conditions

2006 First Half in Review

Looking back at the global economy in the first half of 2006, the U.S. economy continued to display growth despite concerns over the effects of high crude oil prices and an increase in interest rates accompanying inflation fear, with private sector spending and corporate capital expenditure supporting expanded domestic demand. In Europe, the economy continued moving toward moderate recovery amid strong exports. Within Asia, China and India maintained high rates of growth while other economies in the region also enjoyed generally favorable performances. In Japan, the economy continued to indicate a trend toward recovery, boosted by an improvement of employment conditions and increased capital spending fueled by an upturn in corporate profits.

As for the markets in which the Canon Group operates, within the camera segment demand for digital single-lens-reflex (SLR) cameras and compact digital cameras continued to realize healthy growth during the term. Within the office imaging product market, demand for network digital multifunction devices (MFDs) remained solid amid the shift toward color. As for computer peripherals, including printers, while demand within the laser beam printer market grew for color models, and shifted within the inkjet printer market from single-function to multifunction models, the segment suffered amid severe price competition. In the optical equipment segment, although the market for steppers, used in the production of semiconductors, indicated a trend toward moderate recovery, the market for projection aligners, which are used to produce liquid crystal display (LCD) panels, declined due to restrained investment by LCD manufacturers. The average value of the yen in the first half was ¥115.63 to the U.S. dollar and ¥142.36 to the euro, representing year-on-year decrease of about 9% against the U.S. dollar, and 5% against the euro.

Amid these conditions, Canon’s consolidated net sales for the first half increased by 11.2% from the year-ago period to ¥1,952.3 billion (U.S.$16,976 million), boosted by a solid rise in sales of digital cameras, color network MFDs and laser beam printers, along with the positive effects of favorable currency exchange rates. The gross profit ratio marked a high level, improving 1.7 points year on year to reach 50.1%. The increase in the gross profit ratio was mainly the result of such factors as the launch of new products and cost reduction efforts realized through ongoing production-reform and procurement-reform activities, along with favorable sales of high value-added products. These absorbed the effects of escalating raw material costs, as well as severe price competition in the consumer product market. Owing to the increase in sales and an improvement in the gross profit ratio, first-half gross profit increased by 15.1% to ¥978.7 billion (U.S.$8,511 million). As for operating expenses, while first-half R&D expenditures grew by ¥10.1 billion (U.S.$88 million) for the year-ago period to ¥146.5 billion (U.S.$1,274 million), the operating expense to net sales ratio improved 0.2 points year on year as a result of limiting growth in selling, general and administrative expenses, with the exception of a temporary increase in expenses related to the relocation of operating bases. Consequently, operating profit in the first half totaled ¥338.5 billion (U.S.$2,943 million), a year-on-year increase of 25.3%. Although other income (deductions) declined mainly due to an increase in currency exchange losses on foreign-currency-denominated transactions, income before income taxes and minority interests in the first half totaled ¥341.0 billion (U.S.$2,966 million), a year-on-year increase of 20.2% as interest income grew in line with the rise in the interest rate, and first-half net income totaled ¥214.2 billion (U.S.$1,862 million), both recording all-time highs on a first-half basis.

Basic net income per share for the first half was ¥160.85 (U.S.$1.40), a year-on-year increase of ¥29.11 (U.S.$0.25). (Note: The basic net income per share calculation is based on the number of outstanding shares following the implementation of the stock split previously mentioned in this report.)

Results by Product Segment

In the business machine segment, demand for network digital MFDs, which are grouped in the office imaging products sub-segment, has increased significantly for color models in the U.S. and European markets, as well as in the domestic Japanese market. Within this sector, the iR C3170 series, equipped with a new high-speed image-processing chip, and the iR C3220 series continued to sell well, as did the new high-speed iR C6870-series models. Among monochrome network digital MFDs, mid-level models such as the iR4570 series contributed to expanded sales, along with the iR6570, featuring energy-saving performance, while low-end models, such as the iR2020 series with enhanced networking features, also contributed to sales growth. Overall, sales of office imaging products for the first half realized a year-on-year increase of 3.1%. In the field of computer peripherals, sales of laser beam printers increased for both low-end monochrome and color models while sales of supplies also recorded healthy growth, resulting in a year-on-year increase in sales of 15.4%. As for inkjet printers, despite a decline in the unit sales of single-function models and severe price competition in the market, sales in terms of value increased by 4.3% thanks to such factors as a significant increase in unit sales of multifunction models, such as the mid-level PIXMA MP500 and entry-level PIXMA MP150 for overseas markets, as well as favorable sales growth for consumables. As a result, sales of computer peripherals for the first half increased 11.9% year on year. Within the field of business information products, sales increased by 5.8%, amid healthy demand for an expanded lineup of document scanners. Collectively, sales of business machines for the first half totaled ¥1,286.6 billion (U.S.$11,188 million), a year-on-year increase of 7.5%. Operating profit for the business machines segment totaled ¥294.6 billion (U.S.$2,561 million), a year-on-year increase of 13.5%, supported by such factors as an improvement in the expense ratio and an increase in gross profit accompanying the growth in sales.

Within the camera segment, digital SLR cameras continued to enjoy robust growth, bolstered by particularly strong sales of the EOS DIGITAL REBEL XT and the newly introduced EOS 30D, which has also led to expanded sales of interchangeable lenses. Sales of compact-model digital cameras also continued to expand steadily, with healthy demand for the PowerShot SD550 and PowerShot SD450, as well as the PowerShot SD700 IS, PowerShot SD630, and PowerShot SD600, launched in the first half. Accordingly, unit sales of digital cameras for the first half expanded more than 20% compared with the year-ago period. In the field of digital video camcorders, newly introduced DVD models delivered strong performances, as did Mini DV models. As a result, overall camera sales for the first half increased by 21.4% from the year-ago period to ¥460.3 billion (U.S.$4,002 million). The gross profit ratio for the camera segment also rose substantially, boosted by such factors as favorable sales in high value-added products, along with cost-reduction efforts realized through production-reform and procurement-reform activities. As a result, operating profit for the camera segment increased by 75.8% year on year to ¥108.7 billion (U.S.$946 million).

In the optical and other products segment, while steppers, used in the production of semiconductors, enjoyed steady demand, sales of optical products decreased in the first half amid declining demand for aligners, used to produce LCD panels, due to restrained investment by LCD manufacturers. As for the other products included in the segment, the subsidiary that was acquired last year contributed to significant sales growth. As a result, first-half sales for the optical and other products segment totaled ¥205.4 billion (U.S.$1,786 million), a year-on-year increase of 14.3%. Operating profit for the segment grew by 10.2% year on year to ¥23.2 billion (U.S.$202 million), boosted by the increase in gross profit accompanying the increase in sales.

Cash Flow

In the first half of 2006, Canon maintained cash flow from operating activities of ¥323.9 billion (U.S.$2,816 million), a year-on-year increase of ¥65.9 billion (U.S.$573 million), reflecting the substantial growth in sales and increased cash proceeds from sales, combined with an increase in net income and depreciation expenses. Capital expenditure totaled ¥208.7 billion (U.S.$1,814 million), which was used mainly to expand production capabilities in both domestic and overseas regions, as well as to bolster the company’s R&D-related infrastructure. Cash flow from investing activities totaled ¥210.3 billion (U.S.$1,829 million). As a result, free cash flow totaled ¥113.6 billion (U.S.$987 million), an improvement of ¥36.7 billion (U.S.$319 million) from ¥76.9 billion for the year-ago period.

Cash flow from financing activities recorded an outlay of ¥57.8 billion (U.S.$503 million), mainly resulting from the dividend payout of ¥59.9 billion (U.S.$521 million), an increase of ¥24.4 billion (U.S.$212 million) compared with the previous year. Consequently, cash and cash equivalents, which totaled ¥1,055.2 billion (U.S.$9,175 million), an increase of ¥50.2 billion (U.S.$437 million) from the end of the previous year, remained at a high level.

Non-consolidated Results and Dividend

Canon Inc.’s non-consolidated net sales during the first half totaled ¥1,266.0 billion (U.S.$11,009 million), a year-on-year increase of 9.3%. Ordinary profit grew by 17.1% to ¥246.1 billion (U.S.$2,140 million) and net income increased 12.8% to ¥155.5 billion (U.S.$1,353 million), marking all-time highs for both first-half ordinary profit and net income.

The Board of Directors is planning to increase the interim dividend by ¥17.50 (U.S.$0.15) to ¥50.00 (U.S.$0.43) per share.

Outlook

As for the outlook for the global economy in the third quarter and thereafter, although there are concerns due to such factors as price trends for crude oil and raw materials, as well as rising interest rates in the U.S., Europe, and Japan, the global economy is likely to continue its course toward modest recovery.

In the businesses in which Canon is involved, demand for digital cameras is expected to continue enjoying robust growth in Japan and overseas markets. As for network digital MFDs and laser beam printers, while demand is projected to shift toward full-color models, severe price competition and shifting demand toward lower-priced models are expected to continue. Within the semiconductor-production equipment market, demand for steppers indicates a trend toward moderate recovery, supported by increased investment by chip manufacturers. In the market for projection aligners used in the production of LCD panels, demand is expected to decline due to restrained investment by LCD manufacturers.

Reflecting the latest performance, the company has revised its forecasts for the 2006 fiscal year and now anticipates consolidated net sales of ¥4,130.0 billion (U.S.$35,913 million) and, in addition to consolidated income before income taxes and minority interests of ¥700.0 billion (U.S.$6,087 million), consolidated net income of ¥440.0 billion (U.S.$3,826 million). As for non-consolidated forecasts, while keeping its non-consolidated sales projection of ¥2,700.0 billion (U.S.$23,478 million), the company has revised its non-consolidated ordinary profit forecast to ¥500.0 billion (U.S.$4,348 million) and non-consolidated net income to ¥316.0 billion (U.S.$2,748 million). These forecasts assume currency exchange rates of ¥114 to the U.S. dollar and ¥143 to the euro, representing the same level against the U.S. dollar, and an approximately 4% depreciation of the yen against the euro compared with previous year.

Consolidated Outlook

Fiscal year		Millions of yen
		Year ending												Year ended
		December 31, 2006								Change				December 31, 2005				Change (%)
		Previous Outlook (A)				Revised Outlook (B)				(B - A)				Results (C)				(B / C)
Net sales		¥	4,140,000			¥	4,130,000			¥	(10,000	)		¥	3,754,191			+	10.0	%
Income before income taxes and minority interests			690,000				700,000				10,000				612,004			+	14.4	%
Net income			432,000				440,000				8,000				384,096			+	14.6	%

Non-consolidated Outlook

Fiscal year		Millions of yen
		Year ending												Year ended
		December 31, 2006								Change				December 31, 2005				Change (%)
		Previous Outlook (A)				Revised Outlook (B)				(B - A)				Results (C)				(B / C)
Net sales		¥	2,700,000			¥	2,700,000			¥	—			¥	2,481,481			+	8.8	%
Ordinary profit			489,000				500,000				11,000				440,711			+	13.5	%
Net income			313,000				316,000				3,000				289,294			+	9.2	%

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

GROUP POSITION

1. NUMBER OF GROUP COMPANIES

		June 30, 2006				December 31, 2005				Change
Subsidiaries			216				200				16
Affiliated Companies			13				13				—
Total			229				213				16

2. GROUP STRUCTURE AND MAJOR GROUP COMPANIES

Notes:		1.		The companies with (*) are affiliated companies (equity method).
		2.		Following subsidiaries are listed on domestic stock exchange.
					Tokyo Stock Exchange (1st section): Canon Marketing Japan Inc., Canon Electronics Inc., Canon Finetech Inc.
					Tokyo Stock Exchange (2nd section): Canon Software Inc.
					Osaka Stock Exchange (2nd section): Canon Machinery Inc.
					JASDAQ: Nisca Corporation.
		3.		Canon Sales Co., Inc. changed its corporate name to Canon Marketing Japan Inc. as of April 1, 2006.
				Lotte Canon Co., Ltd. changed its corporate name to Canon Korea Business Solutions Inc. as of March 3, 2006.

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

1. CONSOLIDATED STATEMENTS OF INCOME

														Thousands of
		Millions of yen												U.S. dollars
		Three months				Three months								Three months
		ended				ended								ended
Results for the second quarter		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		¥	1,028,983			¥	912,473			+	12.8			$	8,947,678
Cost of sales			518,788				472,097								4,511,200
Gross profit			510,195				440,376			+	15.9				4,436,478
Selling, general and administrative expenses			262,476				236,252								2,282,400
Research and development expenses			79,377				77,217								690,235
			341,853				313,469								2,972,635
Operating profit			168,342				126,907			+	32.6				1,463,843
Other income (deductions):
Interest and dividend income			6,155				3,289								53,522
Interest expense			(244	)			(303	)							(2,122	)
Other, net			(2,799	)			4,389								(24,339	)
			3,112				7,375								27,061
Income before income taxes and minority interests			171,454				134,282			+	27.7				1,490,904
Income taxes			60,985				48,874								530,304
Income before minority interests			110,469				85,408								960,600
Minority interests			4,564				3,197								39,687
Net income		¥	105,905			¥	82,211			+	28.8			$	920,913

														Thousands of
		Millions of yen												U.S. dollars				Millions of yen
		Six months				Six months								Six months				Year ended
		ended				ended								ended				December 31,
Results for the first half		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				2005
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		¥	1,952,255			¥	1,755,840			+	11.2			$	16,976,130			¥	3,754,191
Cost of sales			973,542				905,800								8,465,582				1,935,148
Gross profit			978,713				850,040			+	15.1				8,510,548				1,819,043
Selling, general and administrative expenses			493,709				443,465								4,293,122				949,524
Research and development expenses			146,527				136,386								1,274,148				286,476
			640,236				579,851								5,567,270				1,236,000
Operating profit			338,477				270,189			+	25.3				2,943,278				583,043
Other income (deductions):
Interest and dividend income			11,143				5,970								96,896				14,252
Interest expense			(625	)			(771	)							(5,435	)			(1,741	)
Other, net			(7,950	)			8,345								(69,130	)			16,450
			2,568				13,544								22,331				28,961
Income before income taxes and minority interests			341,045				283,733			+	20.2				2,965,609				612,004
Income taxes			118,814				101,268								1,033,166				212,785
Income before minority interests			222,231				182,465								1,932,443				399,219
Minority interests			8,057				7,197								70,060				15,123
Net income		¥	214,174			¥	175,268			+	22.2			$	1,862,383			¥	384,096

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

2. DETAILS OF SALES

														Thousands of
Results for the second quarter		Millions of yen												U.S. dollars
		Three months				Three months								Three months
		ended				ended								ended
Sales by product		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006
		(Unaudited)				(Unaudited)								(Unaudited)
Business machines:
Office imaging products		¥	298,949			¥	292,716			+	2.1			$	2,599,557
Computer peripherals			329,867				285,445			+	15.6				2,868,409
Business information products			26,627				25,316			+	5.2				231,538
			655,443				603,477			+	8.6				5,699,504
Cameras			268,224				219,241			+	22.3				2,332,383
Optical and other products			105,316				89,755			+	17.3				915,791
Total		¥	1,028,983			¥	912,473			+	12.8			$	8,947,678

														Thousands of
		Millions of yen												U.S. dollars
		Three months				Three months								Three months
		ended				ended								ended
Sales by region		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006
		(Unaudited)				(Unaudited)								(Unaudited)
Japan		¥	232,604			¥	208,024			+	11.8			$	2,022,643
Overseas:
Americas			309,406				269,403			+	14.8				2,690,487
Europe			329,322				294,330			+	11.9				2,863,670
Other areas			157,651				140,716			+	12.0				1,370,878
			796,379				704,449			+	13.0				6,925,035
Total		¥	1,028,983			¥	912,473			+	12.8			$	8,947,678

														Thousands of
Results for the first half		Millions of yen												U.S. dollars				Millions of yen
		Six months				Six months								Six months				Year ended
		ended				ended								ended				December 31,
Sales by product		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				2005
		(Unaudited)				(Unaudited)								(Unaudited)
Business machines:
Office imaging products		¥	585,437			¥	567,799			+	3.1			$	5,090,757			¥	1,153,240
Computer peripherals			646,663				577,737			+	11.9				5,623,157				1,244,906
Business information products			54,496				51,495			+	5.8				473,877				104,255
			1,286,596				1,197,031			+	7.5				11,187,791				2,502,401
Cameras			460,285				379,152			+	21.4				4,002,478				879,186
Optical and other products			205,374				179,657			+	14.3				1,785,861				372,604
Total		¥	1,952,255			¥	1,755,840			+	11.2			$	16,976,130			¥	3,754,191

														Thousands of
		Millions of yen												U.S. dollars				Millions of yen
		Six months				Six months								Six months				Year ended
		ended				ended								ended				December 31,
Sales by region		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				2005
		(Unaudited)				(Unaudited)								(Unaudited)
Japan		¥	446,298			¥	416,118			+	7.3			$	3,880,852			¥	856,205
Overseas:
Americas			594,473				518,126			+	14.7				5,169,330				1,145,950
Europe			610,943				551,666			+	10.7				5,312,548				1,181,258
Other areas			300,541				269,930			+	11.3				2,613,400				570,778
			1,505,957				1,339,722			+	12.4				13,095,278				2,897,986
Total		¥	1,952,255			¥	1,755,840			+	11.2			$	16,976,130			¥	3,754,191

 

Office imaging products :

Office network digital multifunction devices (MFDs) / Color network digital MFDs / Office copying machines / Personal-use copying machines / Full-color copying machines / etc.

Computer peripherals :

Laser beam printers / Single function inkjet printers / Inkjet multifunction peripherals / Image scanners / etc.

Business information products :

Computer information systems / Document scanners / Personal information products / etc.

Cameras :

SLR cameras / Compact cameras / Digital cameras / Digital video camcorders / etc.

Optical and other products :

Semiconductor production equipment / Mirror projection mask aligners for LCD panels / Broadcasting equipment / Medical equipment / Components / etc.

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

3. SEGMENT INFORMATION BY PRODUCT

														Thousands of
		Millions of yen												U.S. dollars
		Three months				Three months								Three months
		ended				ended								ended
Results for the second quarter		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006
		(Unaudited)				(Unaudited)								(Unaudited)
Business machines
Net sales:
Unaffiliated customers		¥	655,443			¥	603,477			+	8.6			$	5,699,504
Intersegment			—				—				—				—
Total			655,443				603,477			+	8.6				5,699,504
Operating cost and expenses			513,046				484,852			+	5.8				4,461,269
Operating profit			142,397				118,625			+	20.0				1,238,235
Cameras
Net sales:
Unaffiliated customers		¥	268,224			¥	219,241			+	22.3			$	2,332,383
Intersegment			—				—				—				—
Total			268,224				219,241			+	22.3				2,332,383
Operating cost and expenses			203,527				181,202			+	12.3				1,769,800
Operating profit			64,697				38,039			+	70.1				562,583
Optical and other products
Net sales:
Unaffiliated customers		¥	105,316			¥	89,755			+	17.3			$	915,791
Intersegment			47,309				36,637			+	29.1				411,383
Total			152,625				126,392			+	20.8				1,327,174
Operating cost and expenses			143,956				118,032			+	22.0				1,251,791
Operating profit			8,669				8,360			+	3.7				75,383
Corporate and Eliminations
Net sales:
Unaffiliated customers		¥	—			¥	—				—			$	—
Intersegment			(47,309	)			(36,637	)			—				(411,383	)
Total			(47,309	)			(36,637	)			—				(411,383	)
Operating cost and expenses			112				1,480			-	92.4				975
Operating profit			(47,421	)			(38,117	)			—				(412,358	)
Consolidated
Net sales:
Unaffiliated customers		¥	1,028,983			¥	912,473			+	12.8			$	8,947,678
Intersegment			—				—				—				—
Total			1,028,983				912,473			+	12.8				8,947,678
Operating cost and expenses			860,641				785,566			+	9.6				7,483,835
Operating profit			168,342				126,907			+	32.6				1,463,843

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

														Thousands of
		Millions of yen												U.S. dollars				Millions of yen
		Six months				Six months								Six months				Year ended
		ended				ended								ended				December 31,
Results for the first half		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				2005
		(Unaudited)				(Unaudited)								(Unaudited)
Business machines
Net sales:
Unaffiliated customers		¥	1,286,596			¥	1,197,031			+	7.5			$	11,187,791			¥	2,502,401
Intersegment			—				—				—				—				—
Total			1,286,596				1,197,031			+	7.5				11,187,791				2,502,401
Operating cost and expenses			992,031				937,578			+	5.8				8,626,356				1,960,373
Operating profit			294,565				259,453			+	13.5				2,561,435				542,028
Cameras
Net sales:
Unaffiliated customers		¥	460,285			¥	379,152			+	21.4			$	4,002,478			¥	879,186
Intersegment			—				—				—				—				—
Total			460,285				379,152			+	21.4				4,002,478				879,186
Operating cost and expenses			351,549				317,298			+	10.8				3,056,948				705,480
Operating profit			108,736				61,854			+	75.8				945,530				173,706
Optical and other products
Net sales:
Unaffiliated customers		¥	205,374			¥	179,657			+	14.3			$	1,785,861			¥	372,604
Intersegment			88,706				71,818			+	23.5				771,356				158,114
Total			294,080				251,475			+	16.9				2,557,217				530,718
Operating cost and expenses			270,885				230,436			+	17.6				2,355,521				491,898
Operating profit			23,195				21,039			+	10.2				201,696				38,820
Corporate and Eliminations
Net sales:
Unaffiliated customers		¥	—			¥	—				—			$	—			¥	—
Intersegment			(88,706	)			(71,818	)			—				(771,356	)			(158,114	)
Total			(88,706	)			(71,818	)			—				(771,356	)			(158,114	)
Operating cost and expenses			(687	)			339				—				(5,973	)			13,397
Operating profit			(88,019	)			(72,157	)			—				(765,383	)			(171,511	)
Consolidated
Net sales:
Unaffiliated customers		¥	1,952,255			¥	1,755,840			+	11.2			$	16,976,130			¥	3,754,191
Intersegment			—				—				—				—				—
Total			1,952,255				1,755,840			+	11.2				16,976,130				3,754,191
Operating cost and expenses			1,613,778				1,485,651			+	8.6				14,032,852				3,171,148
Operating profit			338,477				270,189			+	25.3				2,943,278				583,043

Note:		General corporate expenses of JPY87,931 million (U.S.$764,617 thousand) and JPY72,160 million in the six months ended June 30, 2006 and 2005, respectively, are included in “Corporate and Eliminations.”

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4. SEGMENT INFORMATION BY GEOGRAPHIC AREA

														Thousands of
		Millions of yen												U.S. dollars				Millions of yen
		Six months				Six months								Six months				Year ended
		ended				ended								ended				December 31,
Results for the first half		June 30, 2006				June 30, 2005				Change(%)				June 30, 2006				2005
		(Unaudited)				(Unaudited)								(Unaudited)
Japan
Net sales:
Unaffiliated customers		¥	505,924			¥	481,444			+	5.1			$	4,399,339			¥	979,748
Intersegment			1,069,960				958,506			+	11.6				9,304,000				2,046,173
Total			1,575,884				1,439,950			+	9.4				13,703,339				3,025,921
Operating cost and expenses			1,203,207				1,129,146			+	6.6				10,462,669				2,362,019
Operating profit			372,677				310,804			+	19.9				3,240,670				663,902
Americas
Net sales:
Unaffiliated customers		¥	590,878			¥	516,933			+	14.3			$	5,138,070			¥	1,139,784
Intersegment			2,456				4,593			-	46.5				21,356				7,424
Total			593,334				521,526			+	13.8				5,159,426				1,147,208
Operating cost and expenses			570,559				503,674			+	13.3				4,961,383				1,110,415
Operating profit			22,775				17,852			+	27.6				198,043				36,793
Europe
Net sales:
Unaffiliated customers		¥	610,293			¥	550,401			+	10.9			$	5,306,896			¥	1,178,672
Intersegment			1,344				1,114			+	20.6				11,687				2,206
Total			611,637				551,515			+	10.9				5,318,583				1,180,878
Operating cost and expenses			593,528				537,469			+	10.4				5,161,113				1,147,658
Operating profit			18,109				14,046			+	28.9				157,470				33,220
Others
Net sales:
Unaffiliated customers		¥	245,160			¥	207,062			+	18.4			$	2,131,825			¥	455,987
Intersegment			361,772				292,479			+	23.7				3,145,845				646,530
Total			606,932				499,541			+	21.5				5,277,670				1,102,517
Operating cost and expenses			584,569				485,679			+	20.4				5,083,209				1,071,155
Operating profit			22,363				13,862			+	61.3				194,461				31,362
Corporate and Eliminations
Net sales:
Unaffiliated customers		¥	—			¥	—			—				$	—			¥	—
Intersegment			(1,435,532	)			(1,256,692	)		—					(12,482,888	)			(2,702,333	)
Total			(1,435,532	)			(1,256,692	)		—					(12,482,888	)			(2,702,333	)
Operating cost and expenses			(1,338,085	)			(1,170,317	)		—					(11,635,522	)			(2,520,099	)
Operating profit			(97,447	)			(86,375	)		—					(847,366	)			(182,234	)
Consolidated
Net sales:
Unaffiliated customers		¥	1,952,255			¥	1,755,840			+	11.2			$	16,976,130			¥	3,754,191
Intersegment			—			—				—				—				—
Total			1,952,255				1,755,840			+	11.2				16,976,130				3,754,191
Operating cost and expenses			1,613,778				1,485,651			+	8.6				14,032,852				3,171,148
Operating profit			338,477				270,189			+	25.3				2,943,278				583,043