Japan fell behind European nations in a ranking of the best places to do business compiled by Bloomberg, underscoring the need for Prime Minister Shinzo Abe to take bolder steps to reduce regulation and attract companies.

As Abe heads to Davos to explain his government’s economic and diplomatic policies to investors and world leaders, Japan dropped nine spots to 12th position, in an index based on six criteria including the cost of setting up a business and readiness of the local consumer base. That left it behind countries including Germany, the U.K., the Netherlands, Spain, Sweden and France. Hong Kong maintained its top ranking.

Abe has vowed to make Japan the easiest place in the world to do business as part of the economic strategy he has promoted since taking office in December 2012. He has yet to introduce legislation such as corporate-tax cuts that companies have advocated to boost Japan’s competitiveness.

“Japan has a less business-friendly environment than Europe,” said Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo. “European nations are more seriously tackling reform in the labor market since they had the sovereign debt crisis. Japan has made little progress in the third arrow of Abenomics ― deregulation and structural reforms.”

Bloomberg Rankings measured nations on a scale of zero to 100 based on six factors including the costs of labor and material, and hiring and moving goods; the degree of economic integration; and less tangible costs such as inflation and corruption.

While Japan scored 75.6, the same as last year when it achieved third place, it performed worse in ratings on the cost of setting up a business, prices of labor and material and the readiness of the local consumer base. Energy costs for Japan have surged as the yen’s drop of more than 14 percent against the dollar in the past year makes imported petroleum and gas more costly. (Bloomberg)