· 6 min read
• Japan has envisioned a 'hydrogen society,' integrating hydrogen across sectors from transportation and steel production to gas and electricity
• Japan promotes hydrogen use in power generation, gas blending and passenger vehicles, but this expansive scope raises questions about strategic focus and feasibility
• Japan’s journey highlights the need for tailored national strategies that align technology, market design and geopolitical realities
As the global pursuit of clean energy accelerates, Japan has distinguished itself with a particularly bold commitment to hydrogen.
The International Energy Agency (IEA) estimates that global hydrogen demand will reach around 130 million tons by 2030, a 45% increase from 2023, and further rise to 430 million tons by 2050. Since 2017, Japan has envisioned a 'hydrogen society,' integrating hydrogen across various sectors from transportation and steel production to gas and electricity. It was the first nation to publish a national hydrogen strategy, positioning hydrogen as a cornerstone for industrial competitiveness and energy security.
Nearly a decade later, Japan's ambitious endeavour offers inspiration and caution. In an era increasingly influenced by geopolitics, technological disruption and pressing climate targets, Japan's high-stakes experiment serves as a timely case study on the complexities of the energy transition.
From vision to realignment: Japan's evolving hydrogen strategy
Japan's 2017 Basic Hydrogen Strategy charted an ambitious course by calling for the eventual establishment of a decarbonized hydrogen supply chain. This optimism was underpinned by domestic innovations, such as Toyota's fuel-cell technology and the launch of the world's first liquefied hydrogen carrier, the Suiso Frontier.
By 2023, practical challenges necessitated a strategic recalibration. The revised strategy adopted a more pragmatic 'Safety + 3E' framework, emphasizing safety, energy security, economic efficiency and environmental sustainability. It outlined a JPY15 trillion ($100 billion) public-private investment plan and stressed international partnerships. Notably, the update signalled a shift towards green hydrogen aspirations, aligning with Japan's 2050 carbon neutrality commitments and global trends.
The IEA projects that low-emissions hydrogen, mostly green hydrogen, will account for about 98% of total consumption by 2050.
Despite these adjustments, Japan's hydrogen vision remains comprehensive. Unlike common approaches that primarily reserve hydrogen for hard-to-abate sectors, like steel, shipping and aviation, Japan continues to promote hydrogen use in power generation, gas blending and passenger vehicles. This expansive scope raises questions about strategic focus and feasibility.
Energy insecurity: The underlying motivator
Japan's profound energy insecurity is a driving force behind its hydrogen strategy. As a resource-poor island nation, it imported approximately 87% of its energy in 2023, with self-sufficiency declining sharply since the 2011 Fukushima nuclear disaster. Public trust in nuclear power remains tenuous and renewable energy expansion is constrained by geographical limitations and grid integration challenges.
With the current renewable energy infrastructure, Japan would need to import renewable hydrogen, which presents a strategic paradox. While hydrogen is championed as a solution to energy security, its deployment could entrench new forms of dependency if Japan becomes reliant on hydrogen exporters.
The challenges
High costs
Green hydrogen remains significantly more expensive than conventional fuels. While the Japanese government aims to reduce costs through scale and innovation, the path forward remains uncertain. A recent study further underscores this challenge. Even if hydrogen production drops to $2/kg, carbon abatement costs will be $500 to 1,250/tCO2 in most sectors. While production costs often receive the most attention, storage and transportation also constitute comparably significant expenses within the hydrogen supply chain.
Continued dependence on imports
Transitioning from fossil fuel imports to hydrogen imports may shift, but not solve, Japan’s structural vulnerability. With key partners still developing their hydrogen export capacity, the risk of supply delays or price shocks remains real.
Uncertain demand outlook
While Japan has committed to procuring 12 million tons of hydrogen annually by 2040, the government has yet to specify how this hydrogen will be allocated across key sectors. This absence of clarity complicates investment planning and policy alignment, leaving stakeholders to navigate a market whose future scale and composition remain speculative.
Fragile foundations: The global hydrogen supply chain
To secure future supplies, Japan has pursued hydrogen partnerships with Australia, the Middle East and the United States. However, the global supply chain for renewable hydrogen is still in its infancy. According to the IEA Hydrogen Production and Infrastructure Project Database, while Australia and the United States have over 300 renewable hydrogen projects between them, only a small fraction are operational. For example, Australia’s normalized capacity represents just 0.004% of its projected output as of October 2024. This mismatch between ambition and readiness underscores the geopolitical and logistical risks of Japan’s import-heavy strategy. To mitigate these risks, Japan must diversify its hydrogen sources and establish strategic reserves.
With a similarly import-dependent energy landscape, Germany has crafted a more actionable hydrogen import strategy. Its Hydrogen Import Strategy quantifies demand, defines infrastructure paths and mobilizes diplomatic and financial tools. Japan, by contrast, leans on technological leadership and loosely defined supply linkages. Japan’s vision remains ambitious, but often lacks systems-level execution.
Building market infrastructure
A major barrier to hydrogen’s integration into the mainstream energy economy is the lack of a mature trading and pricing infrastructure. Today, hydrogen is largely a custom commodity, with no transparent benchmarks, contracts or trading platforms. This lack of market structure limits scalability and deters investment.
Japan took a lead in this aspect as well. In December 2024, the Tokyo Commodity Exchange, in partnership with the Tokyo Metropolitan Government, launched a trial initiative to develop a hydrogen trading platform. This pilot programme aims to establish the basic rules and operational structure for a future hydrogen market. It marks the world’s first effort to create institutional foundations for market-based hydrogen trading and price discovery, an essential step towards legitimizing hydrogen as a tradable energy asset.
Strategic lessons: Precision over ambition
Policy foresight
Early initiatives have positioned Japan as a technological leader, holding approximately 24% of global hydrogen-related patents and pioneering innovations in liquefied hydrogen shipping and ammonia co-firing.
Need for prioritization
Hydrogen should be focused on sectors where it offers clear value, such as steel production, ammonia synthesis, heavy-duty transport and aviation. Expanding its use into areas like passenger vehicles or residential applications may dilute resources without proportional benefits.
Strategic procurement
Long-term, fixed-price contracts with diverse hydrogen-exporting nations can mitigate future cost spikes and supply disruptions. Engaging with regions like Latin America, Southeast Asia and Africa, areas with strong renewable potential and lower geopolitical risks, could be advantageous.
Japan’s hydrogen strategy reflects challenges faced by many industrialized, resource-scarce countries. While cost is undeniably a major barrier to hydrogen adoption, there are fundamental questions that must be addressed. These include whether to prioritize electrification or molecule-based fuels, whether to invest domestically or rely on foreign imports and how to balance climate ambition with infrastructure feasibility. Hydrogen’s role must be context dependent. Japan’s journey highlights the need for tailored national strategies that align technology, market design and geopolitical realities.
This article is also published on World Economic Forum. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.
