http://www.bloomberg.com/apps/news?pid=20601087&sid=aY.aCOsXC9m4&pos=5 Japanâs Producer Prices Fall 6.7%, 10th Monthly Drop (Update1) Share Business ExchangeTwitterFacebook| Email | Print | A A A By Keiko Ujikane and Mayumi Otsuma Nov. 12 (Bloomberg) --Japanâs producer prices fell for a 10th month in October, underscoring the risk that deflation may undermine the economic recovery. The costs companies pay for energy and unfinished goods tumbled 6.7 percent in October from a year earlier after sliding a revised 8 percent in September, the Bank of Japan said today in Tokyo. The median estimate of 23 economists surveyed by Bloomberg News was for a 6 percent drop. The decline in costs shows how the export-driven recovery has failed to spur demand at home in the worldâs second-largest economy. The central bank forecast last month that producer prices will continue to slide through the year starting April 2011 because weak economic growth will subdue corporate demand for oil, steel and other raw materials. Japanâs producer prices âhave moved into a new phase of âhome-madeâ deflation linked to a lack of domestic demand,â said Kyohei Morita, chief economist at Barclays Capital in Tokyo. âDeflation may become less speedy but could also become more sticky.â From the previous month, prices fell 0.7 percent, todayâs report showed. A return to the deflation that Japan only shook off in 2005 may weigh on growth as businesses and households cut spending in anticipation that prices will keep falling. Falling Prices Bank of Japan Deputy Governor Hirohide Yamaguchi told parliament last week the central bank sees little risk that falling prices would dent economic growth and hamper its return to a sustainable expansionary path. Inflationary expectations among companies and consumers remain stable, he said. Policy board members last month forecast that both wholesale and consumer prices will continue to fall through the year ending March 2012, which would mark the third year of declines. Producer prices will probably drop 1.4 percent in the year ending March 2011 and 0.7 percent in the next 12 months, following this fiscal yearâs estimated 5.2 percent slide, BOJ board members predicted in their semi-annual report. To contact the reporter on this story: Mayumi Otsuma in Tokyo at motsuma@bloomberg.net Last Updated: November 11, 2009 18:58 EST