Make a beeline to this city's most famous attraction, Otaru Canal, eight blocks downhill from JR Otaru Station. Small but charming, it runs between the ports and a contemporary shopping area called the Sakaemachi Street Historic District, which is even more charming: old banks and trading houses have been converted into boutiques and shops. Don't miss the music-box collection and the musical steam clock at Marchen Square on the eastern end of the district. A one-day pass (¥750) on the local bus (some of them look like old trolleys) is a useful energy-saver; during the summer, sunburned rickshaw runners offer tours.
If you feel like seeing the edge of Japan, walk to Otaru Port and you may see Russian, Chinese, and Korean (North as well as South) ships loaded up with used cars, bicycles, and refrigerators. If you're interested in boarding a boat yourself, summertime sightseeing boats depart from the dock just beyond the Chuo Bridge for a 25-minute trip to the Herring Mansion area. If you're ready to leave Hokkaido, there are also ferries to Akita, Niigata, Maizuru, and Tsuruga.