the supplying capacity of the same products in the past. in that context, the oft - discussed output gap seems to have an aspect of an indicator of the mismatch between supply and demand. what is important is the corporate effort to make potential needs into actual demand. in addition, to support such firms ’ efforts, the systems or mechanisms should be reviewed so as to ensure the flexibility of japan ’ s economic structure according to the changes in society and in the global economy. for example, the rate of establishment of new firms and the rate of closure of the existing firms in japan are less than half of those in the united states, suggesting that the metabolism of japan ’ s economy is low. while consideration from various angles would be necessary in order to improve such a situation and prepare a mechanism through which production resources transfer smoothly to areas with strong needs, from the standpoint of a central bank, i will emphasize the role of financial markets, financial institutions, and institutional investors. the financial markets facilitate an efficient fund allocation according to profitability and potential of firms as well as risks, thereby play a role in enhancing the metabolism of the economy. in that regard, a more efficient fund allocation will be possible if versatile markets exist and various fund providers assess the profitability of firms and others. therefore, to develop versatile and efficient financial markets is likely to play an important role also in raising the productivity of the economy as a whole. concluding remarks needless to say, economic growth is eventually achieved by the power of human will. in that regard, in nagoya, there are many firms that have taken various changes in the environment as new opportunities and have achieved high growth by responding to the changes. recently, there have been moves to develop and expand the production of high - value - added products including energy saving automobiles, which is reassuring. if such efforts are stepped up, it would pave the way to a sustained growth path for japan ’ s economy. the bank will do its utmost to support your such efforts from the standpoint of a central bank. thank you.

far more diversified today than in the past, so that brexit is just one factor among many in determining overall economic performance. still, we view brexit as a major downside risk for the irish economy and will be closely monitoring developments in the uk economy as the full impact of brexit takes hold. let me now turn to the primary goal of my speech, which is to discuss the potential implications of brexit for the configuration of the european financial system, with a primary focus on the euro area. if the uk - eu negotiations deliver an agreement that effectively preserves the single passport for uk - resident entities selling into the eu, the net impact of brexit on the structure of the european financial system might be quite minor. however, in scenarios in which uk - resident firms are no longer treated as equivalent to eu firms for regulatory purposes, it is likely that significant migration of financial activity from the uk to the eu will occur. in particular, it is plausible that a larger fraction of trade in euro - denominated financial instruments will take place inside the euro area, with ancillary implications for the location of financial lawyers, professional services firms, central counterparties, clearing services and settlement services. in order to more easily meet regulatory requirements, there may also be shifts in the organisation of the banking groups. in addition, we may expect to see non - eu banks looking to set up subsidiaries in the eu and eu - resident banks possibly converting uk branches into subsidiaries. 1 / 2 bis central bankers'speeches in the post - brexit environment, it is unlikely that financial activity will cluster in a single location in the euro area, since no individual location offers a close substitute to london. an open question is whether the decentralisation of the european financial system will impose significant efficiency costs. once a location is established as a dominant financial centre, there are many selfreinforcing factors that help it to maintain a hegemonic position. most obviously, a deep labour market for financial - sector workers and a localised stock of intangible financial knowledge are highly attractive both for new financial firms and new entrants to the labour market. however, if a shock fundamentally disrupts this equilibrium configuration, it does not follow that a new dominant location will inevitably emerge, since there also countervailing factors that work against the concentration of activity in a single location. this point is especially relevant in the context of the euro area, given the diverse characteristics of its