TOKYO, Jan. 23 (UPI) -- Japan, hurt by falling exports and tensions with trading partner China, said Thursday its 2012 trade deficit hit a record 6.93 trillion yen, or $78 billion.
The numbers included a trade deficit of 641.53 billion yen, or $7.2 billion, in December, the sixth straight month of such negative numbers, the Finance Ministry reported on its web site, making 2012 the second straight year of such deficits.
Japan and China are locked in a growing territorial dispute over the Senkaku Islands in the East China Sea, which both claim. The dispute has led to violent protests in China, hurting Japanese exports and adversely affecting bilateral trade of over $345 billion annually.
Japan, the world's third largest economy after the United States and China, also has been hurt by a rising yen which makes its exports more expensive. The country, which has been enjoying surpluses for decades, suffered its first annual trade deficit in 2011 of 2.56 trillion yen, blamed also on the debt crisis in Europe and the economic slowdown in the United States.
The latest announcement comes on the heels of the Japanese central bank's announcement for monetary stimulus and doubling the inflation target to 2 percent to bring the country out of its chronic deflation, a priority set by the new government of Prime Minister Shinzo Abe.
Analysts told the BBC exports are expected to rise, which should improve the country's trade picture.
"As exports pick up due to gradual recovery in the global economy, Japan's trade deficit is likely to shrink in the coming months," Tatsushi Shikano with Mitsubishi UFJ Morgan in Tokyo told the BBC.
"Although it is unlikely to swing to a surplus this year as the export recovery will be modest and imports are likely to remain high due to elevated oil import costs."