This chapter examines the influence of spatial interdependencies on regional total factor productivity in Japan, focusing on the contrasting effects of Borrowed Size and Agglomeration Shadows. Using panel data from 47 Japanese prefectures between 2000 and 2018, we compare the manufacturing and nonmanufacturing sectors by estimating the Spatial Durbin and Spatial Durbin-SARAR models. These models allow a detailed decomposition of productivity effects into direct (within-region) and indirect (spillover) components across space. The results indicate that industrial agglomeration and transport capital positively affect local productivity in both sectors. However, negative spillovers, interpreted as Agglomeration Shadow effects, also occur, where concentrations in neighboring regions suppress local performance. Human capital consistently exerts a positive impact on manufacturing, with evidence of interregional spillover effects. These findings highlight sector-specific spatial dynamics and underscore the need for differentiated regional policy responses. In the manufacturing sector, promoting networked industrial clustering and labor mobility can enhance productivity, but such policies must be balanced against the risks of overconcentration. In the nonmanufacturing sector, decentralized service economies and spatially equitable infrastructure investments are critical for mitigating competitive displacement from urban cores. By clarifying the conditions under which Borrowed Size and Agglomeration Shadow effects prevail, this chapter contributes to spatial productivity theory and provides actionable insights for designing regionally differentiated development strategies.