Japan Commits US$107 Billion to Hydrogen Despite Persistent Cost Challenges

Japan is spending US$107 billion on hydrogen supply chains and targeting a 1% hydrogen or ammonia share in its power mix by 2030, even as green hydrogen costs in Japan remain two to three times higher than in China according to BloombergNEF. The country's domestic industry momentum — spanning automakers, thermal power generators, and heavy engineering — continues to drive hydrogen investment despite scepticism from international energy analysts.

Japan's interest in hydrogen predates its 2017 Basic Hydrogen Strategy, with fuel cell vehicle development ongoing since the 1990s. The country has led several first-of-kind hydrogen supply chain milestones, including the world's first liquefied hydrogen shipment from Australia on a Kawasaki Heavy Industries vessel, the first blue ammonia cargo from Saudi Arabia, and the first liquid organic hydrogen carrier shipment from Brunei. Mitsui and Co has concluded an ammonia supply contract to support 20% cofiring trials at the JERA Hekinan coal power station — among the world's largest — while JERA has modified a US gas turbine for up to 40% hydrogen cofiring.

Japan's emphasis on hydrogen reflects a specific set of national constraints. In 2020 the country had an energy self-sufficiency ratio of only 11%, making alternative fuels for import a strategic priority. However, analysts note that coal plants cofired with ammonia would likely emit more carbon dioxide than conventional gas plants, and that Japan's limited renewable energy uptake makes domestically produced green hydrogen prohibitively expensive compared with Chinese competitors. Blue hydrogen, produced with carbon capture, faces scrutiny given the underwhelming performance record of carbon capture technology and methane leakage risks. Mitsubishi Heavy Industries claims a 70% global market share in carbon capture, reinforcing Japan's inclination toward that pathway.

Japan's hydrogen strategy carries implications for Southeast Asia, where Japan-led initiatives including the Asia Zero Emission Community promote hydrogen and carbon capture. Indonesia's power sector decarbonisation roadmap, developed with Japan International Cooperation Agency support, lists hydrogen and ammonia as top priorities. Critics warn that Japan's confidence that large numbers of Southeast Asian coal and gas plants will remain operational for decades could delay the region's clean energy transition. The Hydrogen Council noted in May 2023 that only 9% of more than 1,000 announced global hydrogen projects had reached final investment decision, underlining the gap between ambition and execution.

Key figure — Japan is spending US$107 billion on hydrogen supply chains and targeting 1% hydrogen or ammonia in its power mix by 2030.