It was a year of high tension in the East China Sea, with an escalation in a decades-long territorial dispute between Japan and China.
At times there've been fears their disagreement about who owns a group of rocky islands could tip over into armed conflict.
LISTEN: Phillippa Carisbrooke reports.
[sbspodcast id="246973"]
The uninhabited islands in the East China Sea are administered by Japan, under the name Senkaku.
But they are also claimed by China, who call them Diaoyu.
Taiwan too believes it has a claim to the islands, which lie close to rich mineral resources, fishing grounds and shipping lanes.
The territorial dispute intensified in July when Japan's Prime Minister, Yoshihiko Noda, confirmed the country was considering buying some of the islands from their private owners.
"The Senkaku islands are without a doubt, in terms of history and international law, our territory. We are effectively in control of them. There is no problem about its ownership. Looking at it from the point of view in terms of how to peacefully and stably maintain the islands, we have begun talking with the owners of the islands and looking into our options overall."
The suggestion sparked violent protests in China and calls to boycott Japanese goods - resulting in a big drop in sales by Toyota and other companies.
Relations between Japan and China were further inflamed when pro-Chinese activists who managed to land on one of the islands and raise a Chinese flag, were arrested.
The President of the Australian-Chinese Reunification Association, Norman Lee, expressed anger that the group had been seized.
"We actually want to strongly deliver a message to the Japanese government that Diaoyu Islands, from the history, it belongs to China. So any occupied action which keeps it away from China is not lawful and it cannot stand."
Within days of the Chinese group's action Japanese nationalists swam ashore the islands in retaliation, carrying their nation's flag.
Japanese politician Yoshio Kojima said the group had no choice but to take action.
"While there are indeed debates on both sides, if they are allowed to land on the other side and then we do nothing then I do indeed have to wonder if people think that it is alright for Senkaku to become Chinese property."
When the Japanese government went on to nationalise three of the islands there were demonstrations in China - and in Taiwan.
Japan's embassy in Beijing was besieged, and Japanese businesses were attacked.
In Hong Kong this protester voiced fears the dispute could escalate into a military conflict.
"The Japanese should send away their officials off the island first because if not, everybody is going to be sending armies and then that would become another war. We don't want any war, we want peace, but everybody should sit down to talk about the issue."
In Australia, around forty Chinese community groups issued a joint declaration, calling on Japan to return the islands to China.
But the groups' spokesman, Stan Chang, said it would take time to diplomatically resolve the issue.
"It's just a matter of time. It may drag on for another 30 or 40 years. But the key thing is that when China becomes a lot stronger, wealthier and more stable- and develops into a much more democratic country- when we have the power, the muscle and the say- this issue can be resolved."
China's Foreign Minister took the matter to the United Nations General Assembly.
Speaking through a translator, Yang Jiechi, told the UN Japan's moves were illegal.
"They can in no way change the historical fact that Japan stole Diaoyu and it's affiliated islands from China and the fact that China has territorial sovereignty over them. The Chinese Government is firm in upholding China's territorial sovereignty. China strongly urges Japan to immediately stop all activities that violate China's territorial sovereignty, take concrete actions to correct its mistakes and return to the track of resolving the dispute through negotiations."
In the months since Chinese vessels have repeatedly entered the disputed territorial waters.
In a further testing of relations, in December Japan scrambled fighter jets after a Chinese plane flew over the area.
Japan said it was the first time a Chinese plane had breached its airspace, while China's Foreign Ministry said the flight had been routine.
And as the end of 2012 approached, there were predictions that the election of Shinzo Abe for a second term as Japan's Prime Minister could see the country toughen its stance with China.
During his election campaign Mr Abe said he wanted to stop the challenge from China, and promised that a government he led would consider establishing a permanent presence on the Senkaku islands.
