##emphasise the need to complement the consolidation process with structural changes in order to make our economies fitter. this involves reducing red tape to ease business creation, streamlining governance of state - owned enterprises and reallocating workers more flexibly from stagnating and declining industries to productive and expanding ones. structural reforms are not only required in the countries in the euro area, but have also been recognised by prime minister abe in his third arrow as essential to securing the japanese recovery over the long term. thank you for your attention. see, for example, tokuoka, k., “ intergenerational implications of fiscal consolidation in japan ”, imf working papers, 12 / 197, 2012. bis central bankers ’ speeches

peter praet : japan and the eu in the global economy – challenges and opportunities speech by mr peter praet, member of the executive board of the european central bank, at the conference “ japan and the eu in the global economy – challenges and opportunities ”, organised by bruegel, the graduate school of economics, kobe university, and fondation france - japon de l ’ ehess, brussels, 7 october 2013. * * * i would like to thank stephan fahr, georgi krustev and ana lima for their contributions to this speech ; all views expressed remain mine. ladies and gentlemen, it is a pleasure to be able to share some thoughts on the challenges and opportunities japan and europe are facing in the global economy. since the beginning of the financial crisis, there has been no shortage of challenges along the road back to what i would call the “ normal functioning ” of our economies. one of the biggest challenges i see is still to be addressed : that of how to grow in an era of deleveraging. deleveraging can occur in an orderly fashion or it can be chaotic. it may drag our economies down or it can place them on a stronger footing. which of these will be the case depends to a large extent on how we manage the process. today, i will focus my comments on the policy challenges faced by our two economies, especially as regards how to manage the deleveraging process in the euro area, keeping in mind the japanese experience during the 1990s. as witnessed in japan, protracted and large - scale balance sheet adjustments can weaken economic activity over a protracted period of time. repairing the financial sector was an important element in improving the japanese economy. the lesson for the euro area appears to be clear : the overhaul of the financial architecture – including the establishment of a procedure for resolving failing banks – needs to be accomplished in its entirety ; selective mending will not be enough. in my view, we should make use of the momentum offered by the crisis to turn these challenges into opportunities – opportunities to put our economies on a sounder footing. to underscore why i think that we need to address today ’ s challenges in a comprehensive manner and why institutions are crucial in achieving this, i will first briefly review the build - up and adjustment of financial imbalances both in japan and in europe. then i will elaborate on how to manage the deleveraging process and the institutional changes to be implemented, before touching upon the role