Japan’s annual trade deficit rose to a record $78 billion in
2012, according to official data from the Ministry of Finance as reported by
CNN.

Japan, a nation whose export-driven wealth has traditionally
been built on trade surpluses, had a second straight year of trade deficits
thanks to a persistently high yen, trouble with trading partner China and
weakening demand in the eurozone.

Exports fell 5.8% in December 2012 compared to a year
earlier due in large part to a strong yen which makes Japanese exports more
expensive overseas.

A protracted territorial dispute with China in the South
China Sea has also seen Beijing slow its imports of Japanese goods. Japan’s
exports to the country plunged 10.8% in December year-on-year.

Imports grew 1.9% over the same period, with mineral fuels
including oil accounting for 34.1% — and the majority — of Japan’s total
imports for the year.

Late last year, then-prime ministerial candidate Shinzo Abe
campaigned on a mission to turn his country’s economy around. His government
unveiled $117 billion in new stimulus earlier this month.

Beating deflation and curbing the yen’s appreciation is
crucially important,” Abe said on January 10 and that a “daring monetary policy
is essential.”

Earlier this week, the Bank of Japan signed on to Abe’s plan
to raise inflation to 2%, with the hope of pulling the world’s third largest
economy out of a two-decade slump of deflation.

Since mid-November, Japan’s currency has weakened more than
9% and to a two-and-a-half year low — boding well for Japan’s exporters.

Abe, who served as Japan’s premier from 2006 to 2007, was
sworn back into the office on December 26.