Japan’s [B]Domestic Corporate Goods Price Index[/B] printed flat in August, showing producer prices continued to shrink at a record annualized rate of -8.5%. Economists had expected prices to grow 0.2% from the previous month to bring the year-on-year figure up to -8.4%. Prices of imported goods led the way lower, down -34.6% from a year before, with raw materials (particularly petroleum and coal) registering the largest losses at -0.8% on the month and -44.1% in annual terms. The outcome foreshadows continued downward pressure on consumer prices, which shrank for the sixth consecutive month in July, hinting that deflation is set to become entrenched once again in the world’s second-largest economy. This is a dire prospect: if consumers and businesses expect prices to be lower in the future, they will perpetually delay spending and investment waiting for the best possible bargain, bringing economic growth to a virtual standstill. At this point, a rebound in exports seems like the only saving grace for the economy, which looks like a distant prospect for the moment considering recent Current Account data but may be helped if the policies of the incoming DPJ government result in a weaker Japanese Yen.