JAPANESE manufacturers are relocating to China in increasing numbers to escape the high costs of production in Japan owing to an appreciating yen. Hong Kong Trade Development Council executive director Francis Lo said yesterday Japanese manufacturers were finding it difficult to compete and manufacture in Japan as foreign imports had become cheaper given the strong yen. ''Imports to Japan have become more competitive with the domestic production,'' he said, adding that Japan previously had been good at supplying reasonably priced, high quality products to its markets. According to Mr Lo, China was one of the most popular venues for Japanese firms wanting to relocate, and that was benefiting Hong Kong manufacturers as they were being sought out by Japanese to set up mainland joint ventures. ''We are seeing more Japanese firms joining up with Hong Kong firms to set up joint ventures in China for the purpose of making products for sale back into Japan,'' said Mr Lo. Also, an increasing number of Hong Kong manufacturers were going to Japan to join manufacturers there in supplying the Japanese market. He said the Japan move was a recent development which was picking up quickly. Mr Lo said large Japanese manufacturers and companies started shifting bases into China more than three years ago. Being financially stronger, they were able to diversify faster than the medium-sized and small companies which started moving into China about two years ago. Partnerships with Japanese firms have helped Hong Kong companies penetrate the lucrative but closely guarded Japanese market. In the past, Hong Kong's exports, comprising domestic exports and re-exports, have found difficulty gaining access to, or being competitive in, the market. ''With imports so much cheaper, and costs of production so much higher in Japan, Hong Kong products are now in a more advantageous position,'' he said. Japan is the third largest market for Hong Kong exports, after China and the United States. Mr Lo was speaking after the opening of the 5th Food Expo which opened yesterday and will close on Sunday.