TOKYO (AFP) - Japan's Olympus on Tuesday cut its full-year earnings forecast citing weak demand for digital cameras as the troubled company looks to jump back to profitability after an embarrassing accounting scandal.

The camera and medical equipment maker said it now expected a net profit of 6.0 billion yen (S$79 million) in the fiscal year to March, down from an earlier 8.0 billion yen forecast.

Sales would be 740 billion yen, down 2.2 per cent from a previous estimate.

However, for October-December, Olympus said it booked a net loss of 391 million yen, well below a 756 million yen net loss in the same quarter a year earlier. Quarterly sales were 26 per cent lower at 155.46 billion yen, it said.

Olympus lost 48.99 billion yen in its previous fiscal year as it accounted for a scandal that saw it move about US$1.7 billion (S$2,1billion) in investment losses off its books, sparking lawsuits and the arrest of former executives.

The company has announced a major corporate overhaul that includes cutting about seven per cent of its workforce.

Electronics giant Sony has said it will invest 50 billion yen in Olympus as it looks to heal its own battered balance sheet by tapping the lucrative medical equipment market.

Although best known for cameras, Olympus dominates the global market for endoscopes, which are used for internal medical examinations, accounting for nearly 70 per cent of the market.