Cannon Island is a small island situated in the Southwestern Sea, just south-west of Mercay Island. It is easily distinguishable from the large crane that sits at its peak. Cannon Island
It is on this island that you receive two major gameplay items: the Cannon, for 50 Rupees and the Salvage Arm. The Salvage Arm's cost can be dropped from 300 to 200 Rupees if you follow the instructions carefully. Eddo and his assistant, Fuzo run the shop here that will sell you these items as the game progresses.
Hidden away on the island is a Power Gem. A Big Red Rupee can be found here too, which more than pays for the Salvage Arm. Other than that, there is not a lot to do on Cannon Island.