appropriate thank you gifts

I am in Okinawa visiting my American children and their Japanese neighbor has invited us for lunch to welcome their new baby. Not familiar with Japanese customs we are wondering what we should bring as a hostess or thank you gift. Also she gave them a card with yen included for the baby. How so we respond to this?

Usually there is a custom of return gifts - the return gift price should be at least a third of the monetary value given.

Depending on what she gave, take about a third of it and buy a thank you present. Upscale green tea, rice crackers, biscuits are common. So are towel sets but most Japanese people have more towel sets than they know what to do with... A dept. store will have a section dedicated to it, but there is no need to get it from there.

In addition I would take something like cake or fruit or something from the US that you think might be appropriate as a little thing to take as a courtesy gift.