THE Pacific

More than 40 years after the country ended its occupation of the British colony, Japan has become one of Hong Kong’s largest foreign real estate investors.

Japanese companies bought almost $650 million worth of Hong Kong property last year--triple their 1986 investment, real estate analysts estimate, and investment in 1988 is expected to equal the 1987 level. Speculators who have taken the plunge have invested heavily in commercial, residential and hotel projects.

Japanese firms began scooping up Hong Kong property in 1985, when the yen started to rise and Hong Kong investments became cheaper. Since the colony’s dollar is pegged to the U.S. dollar, it falls along with it--depreciating 33% against the yen since the end of 1986.

Hong Kong does not tax capital gains, and its booming property market affords high yields. Initial yields from Hong Kong rents start at 5% and can reach 10% once leases expire and are renegotiated. In Japan’s investment community, a 3% return is considered high.

Hong Kong is also an attractive place to invest because it is only five hours away from Tokyo by air.