Relations between Japan and Hong Kong may be tense, and business communities agree that two-way trade could be better, but at grass-roots level the relationship remains strong. Take Mariko Kazama, for example. In early September, despite being pregnant, she travelled to Hong Kong to visit some of her favourite restaurants, do a spot of shopping and catch up with some of her old friends. "And Mrs Kazama is not an exception in heading for Hong Kong this summer," says her boss, Yukio Tada, president of the Sojitz Research Institute. "In fact, Japanese people have rediscovered their love of travel and Hong Kong is high on the list of places they want to visit." The Working Holiday Scheme set up between Japan and Hong Kong in 2010 goes from strength to strength. According to the Japanese consulate in Hong Kong, 191 applications for working holiday visas were received in the first application period this year, an increase of 58 per cent from the same period last year. Officials hope even more people have applied for visas in the second period from October 8 to 19. Other positive changes in the past year have included the Hong Kong government announcing an adjustment of its travel alert for Japan, confirming the safety of Iwate, Miyagi and Ibaraki prefectures, three of the hardest-hit areas in the earthquake and tsunami of March last year. That disaster, compounded by global financial turmoil, has inevitably affected the Japanese economy. On September 14, the government downgraded its basic assessment of the state of the Japanese economy for the second straight month, identifying slower production and weakening private consumption as the prime causes. In its report, the Cabinet Office said: "The economic recovery [following the March 2011 earthquake and tsunami] appears to be pausing due to the deceleration of the world economy." China and Japan's other key trading partners in Asia have seen exports to Europe decline, but the report expressed confidence that the domestic economy will get back on track once overseas economies start picking up. And Hong Kong will be close to the top of the list of countries and regions that feel the immediate impact of the rebound, Tada believes. The business relationship between the two is best described as flat at the moment, but it has potential to boom in the future, he says. "The Japanese economy is back to a level above that of March 11, 2011, and showed one of its best performances in the first half of the year," Tada says. "And that is despite the strong yen against the dollar. Now, in addition to many major Japanese companies, many small- and medium-sized enterprises are considering moving their operations overseas. Hong Kong has many competitors, such as Singapore and Bangkok, and I believe it is imperative for Hong Kong to continue to differentiate itself from its rivals." Ways of doing that could include introducing special business incentives, building on the already strong partnership bonds and stepping up networking opportunities. Japanese businesses have long seen Hong Kong as a gateway into the mainland market, in addition to being an important trade destination in its own right, and that relationship will inevitably grow, Tada says. Three areas stand out as having great potential, he says, ticking them off his fingers: high-end goods (particularly food), fisheries products and the tourism industry. And Tada is optimistic about the future. "Hong Kong can be a good partner with Japan as both move to a new stage of economic development," he says.