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	April	, 2007.

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.

*Print the name and title of the signing officer under his signature.

The following material is included.

1.  CONSOLIDATED RESULTS FOR THE FIRST QUARTER ENDED MARCH 31, 2007

CONSOLIDATED RESULTS FOR
THE FIRST QUARTER ENDED MARCH 31, 2007

April 24, 2007

CONSOLIDATED RESULTS

		(Millions of yen, thousands of U.S. dollars, except per share amounts)
		Actual																Projected
		Three months				Three months								Three months				Year ending
		ended				ended				Change(%)				ended				December 31,				Change(%)
		March 31, 2007				March 31, 2006								March 31, 2007				2007
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		¥	1,039,793			¥	923,272			+	12.6			$	8,811,805			¥	4,540,000			+	9.2
Operating profit			207,403				170,135			+	21.9				1,757,653				790,000			+	11.7
Income before income taxes and minority interests			207,844				169,591			+	22.6				1,761,390				800,000			+	11.2
Net income		¥	131,250			¥	108,269			+	21.2			$	1,112,288			¥	505,000			+	10.9
Net income per share:
- Basic		¥	99.28			¥	81.32			+	22.1			$	0.84			¥	388.32			+	13.6
- Diluted			99.25				81.28			+	22.1				0.84				—				—
		Actual
		As of				As of								As of
		March 31,				December 31,				Change(%)				March 31,
		2007				2006								2007
		(Unaudited)												(Unaudited)
Total assets		¥	4,307,815			¥	4,521,915			–	4.7			$	36,506,907
Stockholders’ equity		¥	2,901,811			¥	2,986,606			–	2.8			$	24,591,619

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 JPY118 = U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of March 30, 2007, solely for the convenience of the reader.
		3.		Canon made a three-for-two stock split on July 1, 2006, all per share information has been adjusted to reflect the stcok split.

Canon Inc. Headquarter office		30-2, Shimomaruko 3-chome, Ohta-ku Tokyo 146-8501, Japan Phone: +81-3-3758-2111

Operating Results and Financial Conditions

2007 First Quarter in Review

Looking back at the global economy in the first quarter of 2007, economic expansion was fairly steady despite brief concern over the economic impact of such factors as the global downturn in stock prices. The U.S. economy continued to display growth, supported by healthy employment conditions and healthy consumer spending, despite a decrease in housing investment and a moderate slowdown in corporate capital investment. In Europe, while exports appeared somewhat sluggish due to the appreciation of the euro, the region indicated a trend toward moderate recovery as domestic demand expanded in major European countries, boosted by such factors as increased consumer spending owing to improvements in the employment environment. Within Asia, the Chinese economy maintained a high growth rate while other economies in the region also enjoyed generally favorable conditions. In Japan, the economy maintained a trend toward recovery thanks to such factors as increased capital spending fueled by strong corporate performances and gradual improvements in consumer spending.

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 quarter. Within the office imaging product market, demand for network digital multifunction devices (MFDs) remained solid amid the shift in all regions toward color models and advanced functionality. In the computer peripherals segment, which includes printers, while demand for laser beam printers grew for both color and monochrome models, and demand for inkjet printers shifted from single-function to all-in-one models, multifunctional models in particular suffered amid severe price competition. In the optical equipment segment, while demand for steppers, used in the production of semiconductors, indicated a 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 for the quarter was ¥119.33 to the U.S. dollar and ¥156.45 to the euro, representing a year-on-year decrease of about 2% against the U.S. dollar, and about 11% against the euro.

Amid these conditions, Canon’s consolidated net sales for the first three months of the year totaled ¥1,039.8 billion (U.S.$8,812 million), a year-on-year increase of 12.6%, marking the first time that first-quarter sales have surpassed ¥1,000.0 billion. A significant rise in sales of digital cameras, color network MFDs and printers contributed to this growth, along with the depreciation of the yen. The gross profit ratio for the quarter recorded a quarterly high of 51.3%, a year-on-year increase of 0.6 points. The improved gross profit ratio was mainly the result of such factors as suppressing price decline through the launch of new products and cost-reduction efforts realized through ongoing production-reform and procurement-reform activities, and the in-house production of key components, which absorbed the negative effects of severe price competition in the consumer product market. Owing to the increase in sales and the improved gross profit ratio, first-quarter gross profit rose by 13.9% to ¥533.7 billion (U.S.$4,523 million). As for operating expenses, while first-quarter R&D expenses grew by ¥5.8 billion (U.S.$49 million) from ¥67.1 billion for the year-ago period to ¥72.9 billion (U.S.$618 million), the rate of increase in selling, general and administrative expenses was less than the growth rate of net sales. Consequently, operating profit in the first quarter totaled ¥207.4 billion (U.S.$1,758 million), a substantial year-on-year increase of 21.9%. Other income (deductions) improved by ¥1.0 billion (U.S.$8 million), despite an increase in currency exchange losses on foreign-currency-denominated trade receivables, mainly due to an increase in interest income accompanying the rise in the interest rate. As a result, income before income taxes and minority interests in the first quarter totaled ¥207.8 billion (U.S.$1,761 million), a year-on-year increase of 22.6%, while first-quarter net income recorded an all-time quarterly high of ¥131.3 billion (U.S.$1,112 million), a year-on-year increase of 21.2%.

Basic net income per share for the quarter was ¥99.28 (U.S.$0.84), a year-on-year increase of ¥17.96 (U.S.$0.15). (Note: The basic net income per share calculation for 2006 has been adjusted to reflect the stock split executed in July 2006.)

Results by Product Segment

In the business machine segment, demand for network digital MFDs, which are grouped in the office imaging products sub-segment, indicates a shift toward color models in both domestic and overseas markets. Additionally, among color network digital MFDs, the iR C2880 series and the newly introduced iR C3880 series continued to sell well. Among monochrome network digital MFDs, such models as the iR3025 series and the iR5075 series contributed to expanded sales. Overall, sales of office imaging products for the quarter realized a year-on-year increase of 6.7%. In the field of computer peripherals, laser beam printers enjoyed year-on-year unit sales growth of more than 60% with both color and monochrome low-end models in particular selling well. In addition, consumables also recorded healthy sales growth, contributing to an increase of 24.2% in value terms for the segment. For inkjet printers, despite a decline in unit sales for single-function models, sales in value terms increased by 12.2% thanks to such factors as a significant increase in unit sales of multifunction models, such as the PIXMA MP600, and favorable sales growth for consumables. As a result, sales of computer peripherals for the year realized a year-on-year increase of 20.9%. Sales of business information products, however, decreased by 4.1% due to a decrease in sales of personal computers in the Japanese market. Collectively, sales of business machines for the quarter totaled ¥715.4 billion (U.S.$6,063 million), a year-on-year increase of 13.3%. Operating profit for the quarter totaled ¥176.5 billion (U.S.$1,496 million), a year-on-year increase of 16.0%, made possible by such factors as an increase in gross profit accompanying the sales growth along with restrained expense spending.

Within the camera segment, demand for digital SLR cameras fueled growth, with the EOS DIGITAL REBEL XTi model, launched in September 2006, selling particularly well which, in turn, led to expanded sales of interchangeable lenses for SLR cameras. Sales of compact digital cameras also continued to expand steadily with healthy demand for the PowerShot SD800 IS model launched in October 2006, which features the DIGIC III image processor. The company strengthened its lineup of compact digital cameras with 6 new models in 2007, including two stylish ELPH-series models and four PowerShot-series models that cater to a diverse range of shooting styles. In the field of digital video camcorders, the company introduced the consumer-market HDV-model HV20, equipped with Canon’s HD CMOS sensor, which, along with MiniDV and DVD models, fills out the company’s digital camcorder lineup. As a result, overall camera sales for the first quarter increased by 15.8% from the year-ago period to ¥222.4 billion (U.S.$1,885 million). The gross profit ratio for the camera segment also rose substantially, boosted by such factors as suppressing price decline through strong sales of high value-added products, including newly introduced products, and cost-reduction efforts realized through production-reform and procurement-reform activities. As a result, operating profit for the camera segment increased by 37.4% year on year to ¥60.5 billion (U.S.$513 million).

In the optical and other products segment, while sales of aligners decreased substantially due to restrained investment by LCD manufacturers, steppers enjoyed steady demand as the industry enters a recovery phase. As a result, sales for the segment totaled ¥102.0 billion (U.S.$864 million), a year-on-year increase of 1.9%. Operating profit for the segment grew by 23.9% year on year to ¥18.0 billion (U.S.$152 million).

Cash Flow

In the first quarter of 2007, Canon generated cash flow from operating activities of ¥152.8 billion (U.S.$1,295 million), a year-on-year increase of ¥37.9 billion (U.S.$321 million), reflecting the substantial growth in net income. Cash flow from investing activities totaled ¥124.2 billion (U.S.$1,052 million), due to such factor as a ¥118.9 billion (U.S.$1,008 million) capital expenditure that was used mainly to expand production capabilities. As a result, free cash flow totaled ¥28.6 billion (U.S.$243 million), representing a ¥37.8 billion (U.S.$320 million) improvement from negative ¥9.2 billion for the year-ago period.

Cash flow from financing activities recorded an outlay of ¥269.6 billion (U.S.$2,285 million), mainly resulting from the dividend payout of ¥66.6 billion (U.S.$564 million), an increase of ¥6.7 billion (U.S.$57 million) compared with the previous year, and the ¥200.0 billion (U.S.$1,695 million) purchase of treasury stock in accordance with the company’s basic policy regarding profit distribution. Consequently, cash and cash equivalents, which totaled ¥915.0 billion (U.S.$7,754 million), although representing a ¥240.7 billion (U.S.$2,039 million) decrease from the end of the previous year, remained at a high level.

Outlook

As for the global economic outlook in the second quarter and thereafter, although uncertainty surrounds such factors as the future direction of crude-oil and raw-material prices and a slowdown in the U.S. economy, the global economy is expected to continue growing steadily.

In the businesses in which Canon is involved, demand for both compact digital cameras and digital SLR cameras is expected to continue enjoying robust growth. As for network digital MFDs and laser beam printers, while additional demand is projected for full-color models, severe price competition and shifting demand toward lower-priced models are expected to continue. Within the semiconductor-production equipment market, while gradually increasing orders from chip manufacturers indicates a trend toward moderate recovery, demand for projection aligners used in the production of LCD panels is expected to remain sluggish due to restrained investment by LCD manufacturers.

The company has revised upward its forecasts for the 2007 fiscal year and now anticipates consolidated net sales of ¥4,540.0 billion (U.S.$38,475 million), consolidated income before income taxes and minority interests of ¥800.0 billion (U.S.$6,780 million), and consolidated net income of ¥505.0 billion (U.S.$4,280 million). The company also projects non-consolidated net sales of ¥2,955.0 billion (U.S.$25,042 million), non-consolidated ordinary profit of ¥575.0 billion (U.S.$4,873 million), and non-consolidated net income of ¥377.0 billion (U.S.$3,195 million). Although uncertainty over such factors as future interest rates in major countries make it difficult to predict the direction of currency exchange rates, significant changes in rates are not anticipated. These forecasts assume currency exchange rates of ¥117 to the U.S. dollar and ¥155 to the euro, representing the same level against the U.S. dollar compared with the previous year, and an approximately 6% depreciation of the yen against the euro.

Consolidated Outlook

1st Half

		Millions of yen
		Six months ending								Change				Six months ended				Change (%)
		June 30, 2007												June 30, 2006
		Previous Outlook (A)				Revised Outlook (B)				(B – A)				Results (C)				(B – C) / C
Net sales		¥	2,100,000			¥	2,160,000			¥	60,000			¥	1,952,255			+	10.6%
Income before income taxes and minority interests			375,000				400,000				25,000				341,045			+	17.3%
Net income			238,300				250,000				11,700				214,174			+	16.7%

Fiscal year

		Millions of yen
		Year ending								Change				Year ended				Change (%)
		December 31, 2007												December 31, 2006
		Previous Outlook (A)				Revised Outlook (B)				(B – A)				Results (C)				(B – C) / C
Net sales		¥	4,450,000			¥	4,540,000			¥	90,000			¥	4,156,759			+	9.2%
Income before income taxes and minority interests			775,000				800,000				25,000				719,143			+	11.2%
Net income			495,000				505,000				10,000				455,325			+	10.9%

Non-consolidated Outlook

1st Half

		Millions of yen
		Six months ending								Change				Six months ended				Change (%)
		June 30, 2007												June 30, 2006
		Previous Outlook (A)				Revised Outlook (B)				(B – A)				Results (C)				(B – C) / C
Net sales		¥	1,355,000			¥	1,370,000			¥	15,000			¥	1,266,000			+	8.2%
Ordinary profit			265,000				287,000				22,000				246,101			+	16.6%
Net income			175,000				189,000				14,000				155,548			+	21.5%

Fiscal year

		Millions of yen
		Year ending								Change				Year ended				Change (%)
		December 31, 2007												December 31, 2006
		Previous Outlook (A)				Revised Outlook (B)				(B – A)				Results (C)				(B – C) / C
Net sales		¥	2,930,000			¥	2,955,000			¥	25,000			¥	2,729,657			+	8.3%
Ordinary profit			565,000				575,000				10,000				523,996			+	9.7%
Net income			370,000				377,000				7,000				337,520			+	11.7%

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				Change(%)				ended
		March 31, 2007				March 31, 2006								March 31, 2007
		(Unaudited)				(Unaudited)								(Unaudited)
Net sales		¥	1,039,793			¥	923,272			+	12.6			$	8,811,805
Cost of sales			506,116				454,754								4,289,119
Gross profit			533,677				468,518			+	13.9				4,522,686
Operating expenses:
Selling, general and administrative expenses			253,344				231,233								2,146,982
Research and development expenses			72,930				67,150								618,051
			326,274				298,383								2,765,033
Operating profit			207,403				170,135			+	21.9				1,757,653
Other income (deductions):
Interest and dividend income			8,255				4,988								69,958
Interest expense			(393	)			(381	)							(3,331	)
Other, net			(7,421	)			(5,151	)							(62,890	)
			441				(544	)							3,737
Income before income taxes and minority interests			207,844				169,591			+	22.6				1,761,390
Income taxes			72,547				57,829								614,805
Income before minority interests			135,297				111,762								1,146,585
Minority interests			4,047				3,493								34,297
Net income		¥	131,250			¥	108,269			+	21.2			$	1,112,288

Note:		Canon’s comprehensive income consists of net income, change in foreign currency translation adjustments, change in net unrealized gains (losses) on securities, change in net gains (losses) on derivative financial instruments and change in pension liability adjustments. Comprehensive income for the three months ended March 31, 2007 and 2006 were JPY184,096 million (U.S.$1,560,136 thousand) and JPY114,057 million, respectively.

2.  DETAILS OF SALES

Sales by product

														Thousands of
		Millions of yen												U.S. dollars
		Three months				Three months								Three months
		ended				ended				Change(%)				ended
		March 31, 2007				March 31, 2006								March 31, 2007
		(Unaudited)				(Unaudited)								(Unaudited)
Business machines:
Office imaging products		¥	305,562			¥	286,488			+	6.7			$	2,589,508
Computer peripherals			383,097				316,796			+	20.9				3,246,585
Business information products			26,732				27,869			–	4.1				226,543
			715,391				631,153			+	13.3				6,062,636
Cameras			222,443				192,061			+	15.8				1,885,110
Optical and other products			101,959				100,058			+	1.9				864,059
Total		¥	1,039,793			¥	923,272			+	12.6			$	8,811,805

Sales by region

														Thousands of
		Millions of yen												U.S. dollars
		Three months				Three months								Three months
		ended				ended				Change(%)				ended
		March 31, 2007				March 31, 2006								March 31, 2007
		(Unaudited)				(Unaudited)								(Unaudited)
Japan		¥	232,459			¥	213,694			+	8.8			$	1,969,992
Overseas:
Americas			306,624				285,067			+	7.6				2,598,508
Europe			337,791				281,621			+	19.9				2,862,636
Other areas			162,919				142,890			+	14.0				1,380,669
			807,334				709,578			+	13.8				6,841,813
Total		¥	1,039,793			¥	923,272			+	12.6			$	8,811,805

Notes:		1.		The primary products included in each of the product segments are as follows:
				Business machines:
				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 / Inkjet multifunction peripherals / Single function inkjet printers / Image scanners / etc.
				Business information products:  Computer information systems / Document scanners / Personal information products / etc.
				Cameras:  Digital SLR cameras / Compact digital cameras / Interchangeable lenses / Digital video camcorders / etc.
				Optical and other products:  Semiconductor production equipment / Mirror projection mask aligners for LCD panels / Broadcasting equipment / Medical equipment / Large format printers / Components / etc.
		2.		The principal countries and regions included in each regional category are as follows: Americas: United States of America, Canada, Latin America Europe: England, Germany, France, Netherlands / Other Areas: Asian regions, China, Oceania

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				Change(%)				ended
		March 31, 2007				March 31, 2006								March 31, 2007
		(Unaudited)				(Unaudited)								(Unaudited)
Business Machines
Net sales:
Unaffiliated customers		¥	715,391			¥	631,153			+	13.3			$	6,062,636
Intersegment			—				—				—				—
Total			715,391				631,153			+	13.3				6,062,636
Operating cost and expenses			538,880				478,985			+	12.5				4,566,780
Operating profit			176,511				152,168			+	16.0				1,495,856
Cameras
Net sales:
Unaffiliated customers		¥	222,443			¥	192,061			+	15.8			$	1,885,110
Intersegment			—				—				—				—
Total			222,443				192,061			+	15.8				1,885,110
Operating cost and expenses			161,913				148,022			+	9.4				1,372,144
Operating profit			60,530				44,039			+	37.4				512,966
Optical and other products
Net sales:
Unaffiliated customers		¥	101,959			¥	100,058			+	1.9			$	864,059
Intersegment			51,659				41,397			+	24.8				437,788
Total			153,618				141,455			+	8.6				1,301,847
Operating cost and expenses			135,626				126,929			+	6.9				1,149,372
Operating profit			17,992				14,526			+	23.9				152,475
Corporate and Eliminations
Net sales:
Unaffiliated customers		¥	—			¥	—				—			$	—
Intersegment			(51,659	)			(41,397	)			—				(437,788	)
Total			(51,659	)			(41,397	)			—				(437,788	)
Operating cost and expenses			(4,029	)			(799	)			—				(34,144	)
Operating profit			(47,630	)			(40,598	)			—				(403,644	)
Consolidated
Net sales:
Unaffiliated customers		¥	1,039,793			¥	923,272			+	12.6			$	8,811,805
Intersegment			—				—				—				—
Total			1,039,793				923,272			+	12.6				8,811,805
Operating cost and expenses			832,390				753,137			+	10.5				7,054,152
Operating profit			207,403				170,135			+	21.9				1,757,653

Note:		General corporate expenses of JPY47,630 million (U.S.$403,644 thousand) and JPY40,510 million in the three months ended March 31, 2007 and 2006, respectively, are included in “Corporate and Eliminations.”

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

4.  CONSOLIDATED BALANCE SHEETS

														Thousands of
		Millions of yen												U.S. dollars
		As of				As of								As of
		March 31,				December 31,				Change				March 31,
		2007				2006								2007
		(Unaudited)												(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		¥	914,972			¥	1,155,626			¥	(240,654	)		$	7,754,000
Time deposits			44,000				41,953				2,047				372,881
Marketable securities			10,371				10,445				(74	)			87,890
Trade receivables, net			682,293				761,947				(79,654	)			5,782,144
Inventories			555,284				539,057				16,227				4,705,797
Prepaid expenses and other current assets			276,551				273,321				3,230				2,343,652
Total current assets			2,483,471				2,782,349				(298,878	)			21,046,364
Noncurrent receivables			13,751				14,335				(584	)			116,534
Investments			110,163				110,418				(255	)			933,585
Property, plant and equipment, net			1,314,778				1,266,425				48,353				11,142,186
Other assets			385,652				348,388				37,264				3,268,238
Total assets		¥	4,307,815			¥	4,521,915			¥	(214,100	)		$	36,506,907
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term loans and current portion of long- term debt		¥	15,008			¥	15,362			¥	(354	)		$	127,186
Trade payables			487,931				493,058				(5,127	)			4,135,008
Income taxes			79,551				133,745				(54,194	)			674,161
Accrued expenses			289,686				303,353				(13,667	)			2,454,966
Other current liabilities			193,558				217,789				(24,231	)			1,640,323
Total current liabilities			1,065,734				1,163,307				(97,573	)			9,031,644
Long-term debt, excluding current installments			15,829				15,789				40				134,144
Accrued pension and severance cost			47,167				83,876				(36,709	)			399,720
Other noncurrent liabilities			58,851				55,536				3,315				498,738
Total liabilities			1,187,581				1,318,508				(130,927	)			10,064,246
Minority interests			218,423				216,801				1,622				1,851,042
Stockholders’ equity:
Common stock			174,603				174,603				—				1,479,686
Additional paid-in capital			403,509				403,510				(1	)			3,419,568
Legal reserve			45,280				43,600				1,680				383,729
Retained earnings			2,428,831				2,368,047				60,784				20,583,314
Accumulated other comprehensive income (loss)			55,564				2,718				52,846				470,881
Treasury stock			(205,976	)			(5,872	)			(200,104	)			(1,745,559	)
Total stockholders’ equity			2,901,811				2,986,606				(84,795	)			24,591,619
Total liabilities and stockholders’ equity		¥	4,307,815			¥	4,521,915			¥	(214,100	)		$	36,506,907
														Thousands of
		Millions of yen												U.S. dollars
		As of				As of								As of
		March 31,				December 31,								March 31,
		2007				2006								2007
		(Unaudited)												(Unaudited)
Allowance for doubtful receivables		¥	13,643			¥	13,849							$	115,619
Accumulated depreciation			1,422,084				1,382,944								12,051,559
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments			22,731				22,858								192,636
Net unrealized gains (losses) on securities			5,856				8,065								49,627
Net gains (losses) on derivative financial instruments			611				(1,663	)							5,178
Pension liability adjustments			26,366				(26,542	)							223,440

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

5.  CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Millions of yen
		Common Stock				Additional paid-in capital				Legal reserve				Retained earnings				Accumulated other comprehensive income (loss)				Treasury stock				Total stockholders’ equity
Balance at December 31, 2006		¥	174,603			¥	403,510			¥	43,600			¥	2,368,047			¥	2,718			¥	(5,872	)		¥	2,986,606
Cumulative effect of a change in accounting principle — adoption of EITF 06-2, net of tax															(2,204	)											(2,204	)
Capital transaction by consolidated subsidiaries							(4	)																			(4	)
Cash dividends															(66,582	)											(66,582	)
Transfers to legal reserve											1,680				(1,680	)											—
Comprehensive income
Net income															131,250												131,250
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments																			(127	)							(127	)
Net unrealized gains and losses on securities																			(2,209	)							(2,209	)
Net gains and losses on derivative instruments																			2,274								2,274
Pension liablity adjustments																			52,908								52,908
Total comprehensive income																											184,096
Repurchase of treasury stock, net							3																(200,104	)			(200,101	)
Balance at March 31, 2007		¥	174,603			¥	403,509			¥	45,280			¥	2,428,831			¥	55,564			¥	(205,976	)		¥	2,901,811
Balance at December 31, 2005		¥	174,438			¥	403,246			¥	42,331			¥	2,018,289			¥	(28,212	)		¥	(5,410	)		¥	2,604,682
Conversion of convertible debt and other			8				12																				20
Cash dividends															(59,912	)											(59,912	)
Transfers to legal reserve											858				(858	)											—
Comprehensive income
Net income															108,269												108,269
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments																			3,796								3,796
Net unrealized gains and losses on securities																			1,137								1,137
Net gains and losses on derivative instruments																			855								855
Total comprehensive income																											114,057
Repurchase of treasury stock, net																							(37	)			(37	)
Balance at March 31, 2006		¥	174,446			¥	403,258			¥	43,189			¥	2,065,788			¥	(22,424	)		¥	(5,447	)		¥	2,658,810
Thousands of U.S. dollars
Balance at December 31, 2006		$	1,479,686			$	3,419,577			$	369,492			$	20,068,195			$	23,033			$	(49,762	)		$	25,310,221
Cumulative effect of a change in accounting principle — adoption of EITF 06-2, net of tax															(18,678	)											(18,678	)
Capital transaction by consolidated subsidiaries							(34	)																			(34	)
Cash dividends															(564,254	)											(564,254	)
Transfers to legal reserve											14,237				(14,237	)											—
Comprehensive income
Net income															1,112,288												1,112,288
Other comprehensive income (loss), net of tax
Foreign currency translation adjustments																			(1,076	)							(1,076	)
Net unrealized gains and losses on securities																			(18,720	)							(18,720	)
Net gains and losses on derivative instruments																			19,271								19,271
Pension liablity adjustments																			448,373								448,373
Total comprehensive income																											1,560,136
Repurchase of treasury stock, net							25																(1,695,797	)			(1,695,772	)
Balance at March 31, 2007		$	1,479,686			$	3,419,568			$	383,729			$	20,583,314			$	470,881			$	(1,745,559	)		$	24,591,619

CANON INC. AND SUBSIDIARIES

CONSOLIDATED

6.  CONSOLIDATED STATEMENTS OF CASH FLOWS

										Thousands of
		Millions of yen								U.S. dollars
		Three months				Three months				Three months
		ended				ended				ended
		March 31, 2007				March 31, 2006				March 31, 2007
		(Unaudited)				(Unaudited)				(Unaudited)
Cash flows from operating activities:
Net income		¥	131,250			¥	108,269			$	1,112,288
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			64,433				53,331				546,042
Loss on disposal of property, plant and equipment			1,338				5,311				11,339
Deferred income taxes			(528	)			1,047				(4,475	)
Decrease in trade receivables			82,451				85,512				698,737
Increase in inventories			(29,776	)			(31,396	)			(252,339	)
Decrease in trade payables			(2,999	)			(22,503	)			(25,415	)
Decrease in income taxes			(54,284	)			(47,569	)			(460,034	)
Decrease in accrued expenses			(18,579	)			(2,833	)			(157,449	)
Decrease in accrued pension and severance cost			(4,209	)			(7,523	)			(35,669	)
Other, net			(16,287	)			(26,747	)			(138,025	)
Net cash provided by operating activities			152,810				114,899				1,295,000
Cash flows from investing activities:
Purchases of fixed assets			(118,912	)			(109,829	)			(1,007,729	)
Proceeds from sale of fixed assets			1,546				4,557				13,102
Purchases of available-for-sale securities			(1,744	)			(5,255	)			(14,780	)
Proceeds from sale of available-for-sale securities			1,069				1,004				9,059
Increase in time deposits			(2,241	)			(2,393	)			(18,992	)
Acquisitions of subsidiaries, net of cash acquired			(3,082	)			(885	)			(26,119	)
Purchases of other investments			(1,474	)			(6,556	)			(12,491	)
Other, net			645				(4,702	)			5,467
Net cash used in investing activities			(124,193	)			(124,059	)			(1,052,483	)
Cash flows from financing activities:
Proceeds from issuance of long-term debt			742				555				6,288
Repayments of long-term debt			(1,462	)			(2,120	)			(12,390	)
Increase (decrease) in short-term loans			86				(68	)			729
Dividends paid			(66,582	)			(59,912	)			(564,254	)
Purchases of treasury stock, net			(200,101	)			(37	)			(1,695,771	)
Other, net			(2,277	)			5,148				(19,297	)
Net cash used in financing activities			(269,594	)			(56,434	)			(2,284,695	)
Effect of exchange rate changes on cash and cash equivalents			323				(1,992	)			2,737
Net decrease in cash and cash equivalents			(240,654	)			(67,586	)			(2,039,441	)
Cash and cash equivalents at beginning of period			1,155,626				1,004,953				9,793,441
Cash and cash equivalents at end of period		¥	914,972			¥	937,367			$	7,754,000