The venture could provide a preview of the obstacles the U.S., Europe and South Korea might encounter in their far narrower pursuit of hydrogen-powered vehicles, including technological limits, consumer reluctance, high costs and regulations.
"This is a very challenging goal," conceded Yoshikazu Tanaka, chief engineer of the Mirai fuel cell sedan, which Toyota launched in 2014 and now sells in Japan, the U.S. and Europe. "But we need to keep pushing ourselves toward the ambitious creation of a hydrogen society."
In a typically Japanese approach, the government and industry are pushing together, with heavy subsidies flowing in support of corporate hydrogen projects and businesses fully committed to seeing the government's vision through.
One motivation for the collaboration is to project Japan and Japan Inc. as global clean-energy leaders ahead of the 2020 Summer Olympics in Tokyo. This comes at a time when the U.S. is signaling a pullback from its commitments to reduce carbon emissions and China is emerging as a more active fighter against climate change.
Another is the perennial quest for energy independence in a country that depends on imports for nearly all of its oil. Hydrogen holds special promise for resource-poor Japan because it can be produced from a wide variety of sources, including natural gas, coal, biomass, solar or wind power, nuclear power and even through hydroelectric stations.
For the auto industry, the stakes are high. A successful hydrogen campaign could vault Japanese auto champions Honda and Toyota back into the lead in the development of alternative powertrains, as they were with the gas-electric hybrids of the late 1990s and early 2000s. Among the others working on fuel cell vehicles are Daimler, General Motors, Nissan and BMW.
"This is where Japan is different from other countries," said Hiroshi Katayama, deputy director for advanced energy systems at Japan's powerful Ministry of Economy, Trade and Industry, or METI, the government agency spearheading the campaign. "I think Japan is in the lead."
On the other hand, if Japan's massive bet sours, it could divert its auto industry into an expensive dead end and leave it saddled with a technology it can't sell overseas.
Automakers are leading hydrogen infrastructure innovation with a 40 percent share of patents in the subject, according to a March report from Lux Research Inc.
"However, the hydrogen economy is evolving in an isolated, Japan-specific way, and lacks support from other parts of the value chain, questioning the viability of the concept," Lux said.
Indeed, there is a growing cadre of skeptics even among automakers. Daimler CEO Dieter Zetsche has said fuel cells would no longer be a major part of the German automaker's future drivetrain plans, and Tesla CEO Elon Musk famously dubs them "fool cells."