While shortages of intermediate inputs have had some impact, labor supply has room to expand thanks to so-called labor hoarding during the pandemic. Differences in labor supply stance have also resulted in differences in wage growth between countries. In Japan, wages have risen, but the rate of increase has remained moderate.
Functional regulation is desirable not only for competitive equity, but is a political necessity and a practical reality in the process of balancing that is required to move financial regulation. In principle, functional regulation could also be applied to op subs, but the safety net, I submit, would soon create regulatory conflict with that structure.