Hawaiian tourism, a keystone of the state's economy just starting to rebound from a long slump, is taking a new hit from a plunge in Japanese leisure travel after the devastating earthquake and tsunami there.

Visitor arrivals from Japan, Hawaii's second-largest tourist market outside North America, dropped 86 percent last Friday, immediately following the 9.0 temblor, said Mike McCartney, president and CEO of the Hawaii Tourism Authority.

Most of the cancellations came from group tourism, including business meetings and incentive travel.

The visitor industry was just starting to gain momentum, but that momentum doesn't make up for the loss that businesses are feeling now, McCartney said.

The duration and depth of the post-earthquake drop-off in Japanese travel remains to be seen, but it is expected to be significant, he told Reuters.

Some 1.2 million Japanese typically visit Hawaii each year, accounting for 18 percent of the Aloha state's tourism and $2 billion in annual revenues.

Tourism keeps Hawaii moving, economically. We were relying heavily on Asia and the U.S. West, McCartney said, adding, We're open for business, but first and foremost, we express our sympathy to the people of Japan.

Visitor arrivals from Japan actually crept slightly higher Tuesday, the first uptick since the quake. But McCartney said this was likely a short-term blip attributed to travelers with prepaid tickets unwilling to forfeit their trips.

He said many Japanese, even those not directly affected by the disaster, could be expected to refrain from traveling for some time out of respect for victims of the tragedy.

Japanese visitor arrivals to Hawaii dropped nearly 16 percent a month after the 6.8 magnitude Kobe quake in January 1995 but by year's end were up nearly 13 percent compared to 1994 levels, the Tourism Authority said.

The latest disaster comes 10 months into a turnaround in Hawaii's tourist industry, which had been on the decline for nearly two years as the national economy suffered through its worst downturn in decades.

Prior to last week's quake, hotel occupancy rates were in the 90 percent range statewide.

(Editing by Steve Gorman and Jerry Norton)