Japan's producer price index rose 4.2% on year to a 20-month high in January and gained 0.3% from December 2023, according to the Bank of Japan's preliminary data released on Thursday.

The PPI had risen to its highest since May 2023 from a more modest 3.9% increase last December. The reading also beat the consensus forecast of 4%, according to Trading Economics.

Pushing up the PPI in January were beverage and foods, up 2% on year, fossil fuels, up 2.6%, and transportation equipment, up 1.5%, among other items.

Electric power, gas and water bills soared over 11% on year in January while agriculture, forestry and fishery products jumped more than 36%.

The PPI measures prices at the factory gate, or those charged to businesses and distributors. It is distinct from the consumer price index (CPI), which measures prices in retail locations. The PPI is considered a precursor to future movements in the CPI, as retailers try to recoup costs.

The Bank of Japan has a 2% annual target on the nation's CPI. The nation's much-watched CPI-core index rose to a 16-month high of 3% on year last December.

Japan's export price index, on a contract currency basis (generally, US dollars) rose 0.8% on year in January, while the import price index fell 2.2% on year, added the Bank of Japan.