China-Japan ties suffer over Diaoyu Islands dispute(2)

China responded by sending two patrol vessels, and hundreds of Chinese held anti-Japan demonstrations.

Japan's Prime Minister at the time, Yoshihiko Noda, took a hard line, but that didn't bring him much public support.

The new Prime Minister, Shinzo Abe, has called for improved ties with Beijing. But at the same time, he's stressed the islands are an integral part of Japan and there's "no room for talks" over their sovereignty.

The fall out has hit Japanese exports hard.

Government statistics show auto exports to China dropped by 82 percent in October from a year earlier, and total exports to China fell around 11 percent.

With politics and economics closely linked, Shinzo Abe might just have to find room to discuss sovereignty.

The year 2012 marks the 40th anniversary of normalization of Sino-Japanese relations. But ties are facing a grave situation due to the Diaoyu Islands dispute. Shinzo Abe is now Prime Minister, and it's still uncertain if his hawkish stance will change. But there is no doubt friendly ties are in the fundamental interest of both sides.