TOKYO (Reuters) - Sony Corp said on Tuesday it would cut the price of its PlayStation 3 game console with a 20 gigabyte hard disk drive by 10 percent in Japan and launch a new model, weighing on shares in rival Nintendo Co Ltd.

The move follows a similar announcement from Sony on its European game operations last week as the Tokyo-based electronics and entertainment conglomerate aims to ignite demand for the PS3, which has so far trailed Nintendo's hot-selling Wii in sales.

Sony said it would lower the price of the 20 gigabyte (GB) model to 44,980 yen ($384) from 49,980 yen on October 17.

It will also start selling its 60 GB model at 54,980 yen. Sony has not so far suggested a price for the 60 GB model, but it currently retails for around 60,000 yen.

Sony, which competes with Microsoft Corp and Nintendo for dominance in the global videogame industry, said it would launch a new PS3 with a 40 GB hard drive at 39,980 yen in Japan on November 11.

Although the price of the 40 GB model will undercut the 20 GB machine by 5,000 yen, or 11 percent, the new 40 GB set lacks some functions that the 20 GB model offers, including compatibility with game software designed for the PlayStation 2.

PS3 sales have lagged the Wii since the devices were launched late last year due to the PS3's high price and scarcity of strong game titles.

The Wii sells for 25,000 yen in Japan.

Prior to the announcement, shares in Sony closed up 0.5 percent at 5,820 yen.

Nintendo shares, which closed on the Osaka Securities Exchange after the announcement, ended down 0.5 percent at 62,700 yen, losing earlier gains in the last few minutes of trading.

($1=117.09 Yen)
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