Japan's declining productivity can be attributed to "redirected foreign investment away from the Japanese technology sector" coupled with demographic challenges, according to the analysis. Tokyo, however, also gained points in the ranking as it takes on a more prominent role in the defense and security sphere, with the report noting increased collaboration with Washington and other regional partners. Japan also surpassed the U.S. in diplomatic influence — defined as the ability to exercise influence and leverage through economic interdependencies, including trade relations, investment ties and economic diplomacy. Japan now ranks second in this regard, with the U.S. in third place and China remaining at the top. Tokyo's diplomatic influence has reached its highest point since 2020 under then-Prime Minister Shinzo Abe, emerging as the most active diplomatic player last year, conducting 96 bilateral meetings, 47 of which were at the leader level, the survey said.