Japanese electronics group Toshiba Corp plans to end production of mobile phones in Japan around October to cut costs as demand slumps, the Nikkei business daily said on Wednesday.

Toshiba, Japan's No. 6 cellphone maker with a 7 percent market share, will continue to make smartphones in China and outsource production of its other phones, the Nikkei said without citing sources.

The paper added that the company would announce the plan later on Wednesday.

A Toshiba spokesman declined to comment.

Cellphone sales in Japan tumbled about 30 percent last financial year, as a new business model that hiked handset prices prompted consumers to keep their phones longer, while the economic downturn also weakened demand.

Toshiba incurred an operating loss of about 10 billion yen from the cellphone business in the year ended March, the Nikkei said.

Toshiba has forecast it will return to an operating profit this financial year as it pushes ahead with a $3 billion cost-cutting plan. It logged massive losses last year after sharp price falls and sluggish demand battered its main chip business.

Toshiba shares were down 3 percent at 351 yen, little changed after the report. The benchmark Nikkei average rose 0.5 percent.

(Reporting by Mayumi Negishi and Sachi Izumi; Editing by Chris Gallagher)

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