Hong Kong's high operating costs are driving out some Japanese companies and encouraging others to consider relocating to the mainland, the new president of the Hong Kong Japanese Chamber of Commerce and Industry has warned. Ryota Honjo said there was a growing trend for Japanese companies to move north. He said that even though some still maintained headquarters in Hong Kong, many had shifted the bulk of their business operations and production to mainland cities such as Shenzhen and Guangzhou. He said 43 months of falling prices in Hong Kong had not been enough to halt the retreat of Japanese businesses. He said the government still needed to come up with new offerings to reduce the costs of doing business in Hong Kong. 'The government should think more seriously of ways to lower costs in Hong Kong. The price here may be fine for Hong Kong business people, but it's very high for us as we pay in yen,' Mr Honjo said. 'Hong Kong is a gateway to China. The attractiveness is still here. A lot of big companies remain in Hong Kong but a lot of small and medium enterprises, which are more cost cautious, simply cannot accept these high costs and are moving out.' The recent weakening of the US dollar was a minor reprieve for Japanese companies operating in Hong Kong because it lowered their operating costs, Mr Honjo said. The Japanese government has been trying since last year to depreciate the yen to stimulate domestic exports. The exchange rate reached 135 to the US dollar at its lowest point. But the weakening US dollar brought the exchange rate back to 115.79 at the close of trading last week. Mr Honjo also said that Hong Kong needed to become better integrated into the Pearl River Delta region, with developments such as 24-hour cross-border freight traffic, if it hoped to cash in on new trade opportunities with China. 'Japanese companies now do not only consider Hong Kong [when establishing a business presence in the region], but the whole Pearl River Delta,' he said. 'Hong Kong cannot survive by itself . . . the Pearl River Delta is not only a major manufacturing base, but it should also be an important market for Hong Kong.' There are more than 2,000 Japanese companies in Hong Kong, mostly engaged in manufacturing and trade.