The potential growth rate of the economy will be limited to around 1 percent during the period of structural reform in the coming two to three years, but it could rise to 2 percent or more in the decade after that, the government said in an annual report released Tuesday.

But the government’s rosy outlook comes with the proviso that Japan must achieve planned structural reforms and dispose of bad bank loans. If it doesn’t, the report warns, the potential growth rate of the economy will stall at around 1 percent for the next decade.

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