Sales in its Eco Solutions division which manufactures solar panels, among other products fell by about 5% on the year to ¥725.9 billion in the six months to September 30.
The division, which accounted for just 2.9% of total group sales in the first half, was hit by falling PV module prices and "significant market shrinkage" in Japan, according to an emailed statement.
Lower sales of solar panels in Japan dragged the divisions profitability down to ¥20.9 billion, from from ¥33.5 billion a year earlier.
Its group operating profit fell by 28% the first six months of fiscal 2016 to ¥144.6 billion, primarily due to the declining profitability of its residential solar business, as well as exchange-rate fluctuations and investments in future growth sectors such as housing and automotive parts.
Panasonic has downwardly revised its consolidated group sales forecast for the current fiscal year to ¥7,200 billion, citing the impact of the unexpectedly strong yen.
It also expects a lower full-year group operating profit of ¥245 billion, partly due to the declining profitability of its PV business.
Weak demand for Panasonics PV modules dragged sales in its Eco Solutions division down 3% on the year to ¥1.61 trillion in the 12 months to March 31, 2016.
The companys woes carried over into the first quarter of fiscal 2017, as its group net profit fell 63.5% on the year in the April-June period to ¥21.74 billion ($210 million), partly due to disappointing sales of its solar systems.
However, despite tough competition in Japans changing PV business, Panasonic appears committed to growth in the US solar market.
Last week, the company signed a non-binding letter of intent to jointly produce PV modules and cells with Tesla at a factory in New York state, providing that the electric-vehicle manufacturer manages to finalize its planned acquisition of U.S. solar lease provider SolarCity.