What should Mr Abe do to kick-start growth?

If the right policies were followed, we estimate that Japan’s potential growth rate could rise by around one percentage point. Measures to slow the shrinkage of the labour force and to reduce the regulatory burden are most pressing. Unfortunately, we fear that reform progress will remain glacial in coming years, leaving potential growth pegged at around 0.5%. The upshot is that higher inflation remains the only viable way to restore the health of the public finances.