The surge in interest in Michael Jackson's music was not enough to save Sony from its fourth quarterly loss in a row, but there are signs of optimism for the Japanese media group.

The consumer electronics and entertainment company.

Yesterday it reported losses of ¥26.3bn (£175m) in the three months from July. Sony said it expected annual losses of ¥95bn this year, a slight improvement on its initial estimate of ¥120bn..

Sony's susceptibility to the global recession was underlined this year when it reported a ¥98.9bn loss for 2008. Its Sony/ATV music publishing venture benefited from the boost in sales of Michael Jackson albums following his death in June. Sales of PlayStation 3 game consoles also picked up, but Sony is heading for its first consecutive annual loss since it became a listed company in 1958.

Sales in its gaming division improved after a 25% cut in the price of the PS3 last month. Sony sold 3.2m PS3s in the quarter compared with 2.4m in the same period last year. The price cut helped the PS3 outsell Nintendo's Wii console in the US for the first time last month.

Nintendo, the world's biggest maker of videogame machines, said this week that its first-half profits had plunged by more than 50% due to sluggish sales of the once-dominant console and lowered its annual profit forecast by a quarter.

Sony, like other Japanese manufacturers, has seen its profits hit hard by the rise of the yen against the dollar and the euro. The Japanese currency's appreciation wiped ¥77bn from quarterly operating profit, Sony said.

But Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management in Tokyo, said the firm could have further lowered its estimated losses for this year given the clear improvement in demand.

"In April to June and July to September, there was a sense that external conditions improved, and the euro didn't fall that much against the yen, so I thought they could have raised their forecasts a bit more," he said. "I think the company is being cautious."

Sony's Welsh-born chief executive, Sir Howard Stringer, has imposed a tough cost-cutting regime and refocused attention on the group's electronics business in to challenge rivals such as Apple. Sony is cutting 16,000 jobs and closing eight factories worldwide in an attempt to return to profit. "The restructuring of our business is progressing smoothly on schedule," Nobuyuki Oneda, the company's chief financial officer, told reporters.

Sony said its electronics and device divisions turned a profit in the second quarter, but that its flat-screen TV and game chip concerns had been hit by lower prices.

Analysts said the consumer electronics industry's woes were expected to continue this year, but a modest recovery in the sector offered cause for optimism. Toshiba, Japan's biggest microchip manufacturer, said its semiconductor business returned to profit in the second quarter from cost cuts and better price stability, but warned that demand could weaken again. It has benefited from the popularity of Apple's iPhone and Sony's PlayStation 3 game console – both of which use its chips – but kept its full-year forecast for its electronic devices division to a ¥60bn loss.

Panasonic reported its first profit in three quarters, boosted by sales of DVD recorders and energy-efficient fridges, as consumers took advantage of government subsidies for eco-friendly appliances. It made an operating profit of ¥49.1bn in the second quarter, down from ¥118.6bn a year earlier, and raised its full-year profit forecast by 60% to ¥120bn.